Untitled - Tholons

Transcription

Untitled - Tholons

Table of Contents
u
Introduction
v
Methodology
2
3
u Converging Centers of Excellence
4
v
Offshore Nations: Top 5 •
India
6
•
The Philippines
9
•
Ireland
11
•
China
13
•
Brazil
16
v
Offshore Nations: Next 5 •
Poland
18
•
Vietnam 20
•
Canada 22
•
Mexico
24
•
Russia
26
v
Offshore Nations: Emerging 20
•
Argentina 28
•
Egypt
30
•
Czech Republic
32
•
Chile
33
•
Sri Lanka 34
•
South Africa
36
•
Costa Rica 38
•
Hungary 39
•
United Kingdom
40
•
Malaysia 41
•
Ghana
42
•
Romania 43
•
Slovakia 44
•
Singapore 45
•
Bulgaria 46
•
Morocco 47
•
Estonia
48
•
Uruguay 49
•
Slovenia 50
•
Ukraine
51
u
Emerging and Emerged Outsourcing Destinations
52
u Services by Region: Cities as Cluster
54
v
Services by Regions
54
v
Cities as Clusters 55
•
South America: Greater Sao Paulo
56
•
South Asia: Delhi NCR
57
•
South Asia: Hyderabad-Secunderabad
58
•
Southeast Asia: Kuala Lumpur-Cyberjaya
59
•
Southeast Asia: Manila NCR
61
v
Future City Clusters: Disappearing International Boundaries
63
u Conclusion
64
u Glossary
65
u Abbreviations
66
u Appendix 1: Consolidated Country Data
67
u Appendix 2: Consolidated City Data
71
u Appendix 3: Consolidated City Scores
79
Page 1
Introduction
There is no discounting the effects of the current global economic
downturn, nevertheless the outsourcing and offshoring industry
has continued to show signs of evolution and maturity - with the
industry remaining relatively dynamic and established service
provider nations showing pronounced stability. For instance, the
Philippines increased outsourcing revenues by 25% from US$4.8
billion in 2007 to US$6 billion in 2008 while increasing industry
employment by 33% to an estimated 400,000 employees. On
the other hand, India posted 35% YoY growth rates in revenues
over the last five years reaching, US$40 billion in IT-BPO export
services in 2008. In a parallel view, while a number of developing
economies struggled to acquire investments from client nations,
India’s FDI posted the largest increase globally at 46% in 2008
- from US$25 billion to US$46 billion even as global FDI flows
decreased from US$1.9 trillion to US$1.7 trillion.
For this year’s iteration, Tholons reflects on the general
trends that continue to influence the growth of outsourcing
destinations, and in relation to the different levels of maturity in
terms of location capabilities. While taking the global recession
into consideration, Tholons believes that only a handful of new
outsourcing destinations emerged over the last year while
established (or emerged) and emerging centers solidified positions.
Whether providing new services or consolidating current service
capabilities, the goal of delivery locations remains clear – growth
and stability amidst the global financial crisis.
With this in mind, Tholons believes that the general
movement of outsourcing destinations in 2009 will remain
minimal compared to previous years where drastic movement
across different service and value lines were observed. For the
fourth year running, Tholons presents the Tholons Global Top 50
Emerging Centers of Excellence study which includes the Top 50
Emerging Outsourcing destinations across geographies. The study
also ranks the Top 8 Emerged Outsourcing Destinations as well as
the Next 10 Outsourcing Destinations considered to be “On the
Tholons Radar” for a total of 68 destinations. In addition, the study
also analyzes the way buyers of services (or client nations) look at
offshore nations, and for that purpose, we also have identified Top
5 Offshore Nations, the Next 5 Offshore Nations and the Emerging
20 Offshore Nations. While the Top 5 are considered as mature or
established outsourcing nations, the Next 5 and the Emerging 20
are great alternatives for specific types of processes and are seen
as destinations with considerable near-term potential.
In recent years, the industry and this study have both
Page 2
undoubtedly evolved - from simply identifying countries as
delivery centers to exhaustively studying the potential and
capabilities of specific city locations in those countries. Taking
into consideration various location assessment parameters,
there is an increasing demand for service providers/buyers to
better understand the entirety of the investment location. We
are now moving from simply stating that Vietnam has experts for
Engineering Services Outsourcing (ESO) to the specifics such as,
“which city in Vietnam?” and “what particular processes within
the ESO value chain?” Clients now demand for more information
about Ho Chi Minh as a destination for particular services in ESO,
specifying capabilities in Engineering Design, Testing, Simulation
and Geospatial Services. Apart from this, it is imperative for
industry stakeholders to identify the potential that surrounds
such delivery centers. For instance, does the labor pool of Makati
City come from the city alone, which has just over 600,000
inhabitants? What are the characteristics of the graduate pool
that a city and surrounding cities possess/produce? Also, does the
number of graduates in a city translate into an actual employable
talent pool?
With increased competition amongst service providers
offering similar value propositions - distinction and categorization
has indeed become difficult. Location assessment has hence
become increasingly complex and important. Today, the need to
understand the delivery capability of a potential investment site is
determined and based on a plethora of ecosystem variables.
As with the previous versions of this annual report, the
Tholons Location Assessment Platform is the backbone of this
year’s study. The Platform utilizes six mutually exclusive categories
in providing adept location assessment. Since each category is
comprised of sub-categories possessing a corresponding weight,
the Framework allows for a more thorough analysis of each
location and their potential as outsourcing delivery centers. The
image on the succeeding page provides a representation of the
six major categories of the Tholons Location Assessment Platform
and the corresponding sub-categories.
This proprietary Framework not only focuses on specific
characteristics of the city but also takes into consideration
the underlying factors determining the potential of the city in
relation to its ecosystem. It is not enough to identify the number
of graduates in a particular city alone for example. Since there
is an observed seamless flow of workforce from one city to its
neighboring city, it is also necessary to identify the potential labor
pool the city may draw from – by identifying the composition
of graduates of surrounding cities. For instance, the number of
graduates in the Greater Toronto Area, comprised of the City
of Toronto, and regions of Durham, Halton, Peel and York, is
considered to boost the Skills and Scalability score of Toronto
proper and likewise provides additional labor resources for
Toronto’s outsourcing industry. Another example would be San
Jose, Costa Rica which has a total city population of only 350,000.
However, with a small land area and a larger country population
of about 4 million, the city is able to attract and absorb labor from
surrounding city centers. Thus, San Jose becomes a sort of focal
point - where labor funnels into the city, fueling its outsourcing
segment. Another critical factor for judging talent pool is the
employability/skills availability relevant to the local outsourcing
industry. A large metropolitan like Rio de Janeiro may have a huge
graduate population and attract more from neighboring cities;
however there are other industries (tourism, logistics, etc.) which
attract most of the talent pool. Also the remaining/aspiring pool
might not be as well skilled or employable by the outsourcing
industry. The factor that decides if the numbers translates into
real employees – skills and employability, is hence taken into
consideration when judging the scale and quality of a talent pool.
Methodology
The Tholons Global 50 Emerging Centers of Excellence report
provides a weighted ranking of specific locations in relation to
their respective capacities as global outsourcing destinations.
The following methodologies were implemented in fulfilling
the report:
• Primary Research. Tholons utilized surveys and interviews
with both Tier I & II service providers and buyers. These
surveys were used to determine delivery and consumption
trends for outsourced services in specific destinations. Primary
data gathering methodologies were also implemented to
determine market and labor sizes as well as expansion
strategies of Tier I & II service providers. Tholons utilizes its
extensive network of industry stakeholders including buyers
and suppliers of services, governments, trade bodies and
associations to collect and validate data and analysis.
• Secondary Research. Tholons utilized secondary research
methods where primary means are not available or possible.
Historical data from governments, global institutions and
agencies, and monetary bodies were used to provide economic
related data. Publicly released data from government sources
were also considered when using country-specific market
data. Publicly available financial records such as quarterly and
annual reports, industry bulletins and trade publications were
used to verify market assumptions and analysis.
• Quantitative & Qualitative Analysis. Tholons employs
a combination of quantitative and qualitative analysis
in developing the weighted rankings in this report. Our
proprietary weighing and ranking framework were developed
and refined by senior Tholons consultants over years of direct
client engagements and professional observations. Further,
qualitative analysis was implemented to provide perspective
to the quantitative results of the report. Tholons carefully
considered numerous variables when providing final rankings,
and considered the impact which non-numerical data plays in
the assessment of global outsourcing locations.
Page 3
Converging
Centers of Excellence
Tholons is a pioneer in promoting the Centers of Excellence
concept in the offshoring and outsourcing space, and the concept
has proven its validity over the years. More recently however,
the industry has moved towards convergence of outsourcing
destinations from the perspective of the clients and location
assessment. As the decision on where to locate becomes
more complex and as decision parameters expand constantly,
clients are required to adopt more complex frameworks and
methodologies for location assessment. The best approach looks
at all requirement factors and seeks to find the most appropriate
location for businesses - the Center of Excellence. The answer
is never direct or simple and requires extensive research and
assessment, both on the process requirement and service delivery
fronts. In the client’s search for their appropriate Center of
Excellence – a country is always looked at before a city is finalized.
This is the convergence of the offshore destinations (individual
locations) into offshore nations (collective locations), which this
report aims to capture.
Governments and policy makers have also needed to adjust
and make tough decisions in these challenging times – specific
instances of protectionism and policies discouraging outsourcing
have once again been brought to the table by many Western
economies. Though such dynamics may again test the outsourcing
model, it is expected that the cost and service delivery benefits
which outsourcing provides will ultimately counter any current,
negative waves of thought. Cost margins have also become a
focal discussion point in the last year as stakeholders have made
decisive boardroom decisions, moving aggressively to provide
relief to service providers and clients alike, and in some cases industry preservation. The most aggressive stance has been taken
by the service providers who have taken critical to innovative
steps for client acquisition and retention. Some of the critical
steps have involved cutting down on billing rates and increased
willingness to reduce margins for client retention and acquisition.
The pricing models have almost been re-written/renegotiated in
more than one instance with a clear transition from time-based to
output-based pricing. The FTE based approach has been modified
into a managed services model along with other initiatives like
optimization of the bench strength and increased use of solution
accelerators and automation tools by the IT service providers.
Tholons has also observed instances of upfront savings being
paid to preferred clients by service providers, for retention and
expansion of service level agreements.1
The global outsourcing landscape has evolved significantly
in the last five years, earmarked by increasing complexity and
wide-scale expansion in terms of both locations and outsourced
processes. In this period, Tholons has observed concise
differences between client perception of offshore destinations
and actual location assessment results. Thus, it has become even
more important to understand the client’s viewpoint and location
assessment from their respective standpoints. The theme of
this year’s report attempts to highlight the systematic decision
making steps involved in location assessment and how emerging
destinations are viewed by the decision makers in the industry.
Tholons has also identified the recent convergence of specific
service delivery locations. The report discusses convergence of
these centers from two vantage points - delivery centers as a
part of their respective countries and delivery centers expanding
beyond their geographical boundaries. The coming together
or convergence of cities in a country as one common value
proposition to the client is highlighted in the section, “Offshore
Nations: Top 5, Next 5 and Emerging 20.” The mitigating of
geographical boundaries by cities and formation of city clusters
is also discussed in the subsequent section “Services by Regions:
Cities as Clusters.”
The following diagram illustrates the specific considerations
that Tholons has observed in terms of choosing the right
destination for the right process, and implementing the right
model – a critical identification process for any outsourcing
initiative.
The three major parameters that need to be considered before
a location is chosen are based on the logical flow of destination
selection from Region to Country to City. While the requirement
of the process (planned to outsource) is critical for the successful
operation, the delivery models are vital to the overall objective of
the organization.
Process Requirement. Defines what the company is looking
to achieve in expanding or establishing in an offshore destination.
This is dictated by the vertical (industry) and the horizontal
(process) that the company is looking to outsource or offshore.
While the process requirement is need-based, the following
two parameters are based on the delivery model adopted by the
organization and are not only related to the location selection
process but also the company’s overall business objective and
strategy.
November 2008: Tech Mahindra paid US$100 million upfront as part of future savings to clinch a multi-year outsourcing contract from British Telecom (BT), their premier client. This was the second time the company had paid the savings
upfront for client retention/expansion
1
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Geographical Delivery Model. The onsite, onshore,
nearshore, offshore mix of operations is an important aspect for
decision makers before looking to locate in a new destination or
expanding in an existing one. Optimization of an organization’s
offshore/outsourcing initiatives governs the choice of the
geographical delivery model. The right mix of each of the four is
required for optimal utilization of the organization’s operational
capabilities. Many larger businesses will choose operating from
multiple geographies to utilize the best of all offshore nations or
simply put, to utilize the advantages of
multi-sourcing.
Operational
Delivery
Model.
Defines the type of offshore model
implemented (third party, captive or
build-operate-transfer). It is again
critical for location assessment since
selecting a third party service provider
for Software Testing for example, is
very much different from deciding on a
place to establish captive operations for
Support Services for a software product.
The typical steps in location
selection begins in choosing the region
– country – and then to the selected
city. The above mentioned factors
have a decisive role to play in location
selection, while the operational delivery
model is necessary to decide the region
and country. The geographical delivery model is also critical in
short listing countries. The city selection is however dictated by
the process requirement. Moreover, all the three factors govern
the entire city selection process and are not mutually exclusive to
the selection of region/country/city.
The proper selection of a Center of Excellence is essential to the
development and competitiveness of the client; hence decision
makers must thoroughly analyze each of the above parameters
before the final decision to locate operations is arrived.
Offshore Nations: Top 5, Next 5 and Emerging 20
Tholons has categorized the offshore nations into three
categories, the Top 5, the Next 5 and the Emerging 20. The Top 5
Offshore Nations are the mature and established delivery nations
which typically have pronounced advantages over still emerging
countries, while the Next 5 are those nations which are not as
mature in terms of resources and delivery capacity – while still
emerging being able to compete with the Top 5. The next 20
Offshore Nations on the other hand are countries beginning to
emerge and show progress – and beginning to tap their potential
and capabilities as outsourcing destinations.
Top 5 Offshore Nations (The Leaders): Established offshore
nations with a high degree of maturity and record of successful
delivery capabilities are categorized as the Top 5 Offshore Nations.
These countries typically have Centers of Excellence across
multiple outsourcing segments and rank highly in a number of
location assessment scenarios. These five countries offer the
strongest value propositions to clients based on the Location
Assessment Platform and are considered as prime locations
when considering specific outsourced processes. These emerged
destinations will most often also have the unique advantage of
scale and capacity as compared to smaller or emerging locations.
Next 5 Offshore Nations (The Challengers): The difference
between the Top 5 and the Next 5 offshore nations is most
pronounced in the service level maturity. In terms of potential,
the Next 5 are not far behind, however this potential is considered
to be still unrealized due to specific inhibiting factors. It also must
be stated that the service level maturity has been taken into
consideration from the client point of view, as client nations look
at offshore nations in a distinct manner. This has been taken into
consideration when categorizing locations. This client perception
may change or alter over time, but takes significant effort and
time on a destination’s operational front. Successful service
delivery is the most significant factor in altering client perception.
From the point of view of the decision maker, considering the
country as a convergence of its city centers provides a more
holistic view of the offshore nation’s value proposition. The
valuation of government support, international and industry
policies, cost dynamics and infrastructure availability, is applied
and remains similarly important across these city centers.
Emerging 20 (Developing Offshore Nations): This section
also provides a summary of the Emerging 20 Offshore Nations.
Countries considered as part of the Emerging 20 are not as
mature as the Top 5 and Next 5 but have the capacity to emerge
as significant role players in the outsourcing arena. Emerging 20
Offshore Nations also show notable potential in becoming part
of the Next 5 outsourcing destinations once capabilities are
developed further.
Page 5
Top 5 Offshore Nations
India
India is undoubtedly the most mature and established offshore
nation today, blessed with almost 3.5 million graduates (nontechnology courses) and over 500,000 technical graduates being
churned annually. More importantly, it possesses a largely young
population, many who continue to aspire to be a part of the
outsourcing industry.
The evolution of India towards the forefront of the outsourcing
world started when the country was primarily a back-office
destination that was tapped to offset peak (demand) periods
for software development firms and Contact Centers in Western
economies. The country has come a long way since then, and long
strides have been taken in infrastructure and incentives to further
stimulate its outsourcing industry. NASSCOM2 and STPI3, the
apex bodies of the Indian outsourcing industry have successfully
worked with federal governments at both the national and
state levels to promote and enhance India’s outsourcing value
proposition. India has also matured in terms of services delivery
capabilities, with high-value and knowledge-driven services such
as R&D and Embedded Systems Design/Engineering are now
being successfully processed from the country.
Catalyst
India has strong and inherent capabilities in the outsourcing space
- the main catalyst being its vast and highly-skilled talent pool.
With over 60% of the graduate talent pool educated in English
and a large software engineering talent pool of both experienced
professionals and annual output from its universities – the Indian
outsourcing industry has been able to successfully transition from
being an emerging to a mature destination, and in a relatively
short period of time.
The country is the primary global destination for processes
such as Software Development & Testing, Product Development
for ITO, English voice and non-voice support services for BPO and
has recently begun to establish foundations in Business Analytics,
Consulting and Research Services for the KPO segment.
Accelerators
The support that the offshoring and outsourcing industry receives
from the various associations and government is considered
2
3
NASSCOM: National Association of Software and Services Companies
STPI: Software Technology Parks of India
Page 6
INDIA
Cities in Study
Bangalore, Bhubaneswar, Chandigarh,
Chennai, Coimbatore, Delhi, Hyderabad,
Jaipur, Kolkata, Mumbai, Pune,
Thiruvananthapuram
Population (2008)
1.17 billion
Annual Graduate Output (2008) 3,200,000 – 3,500,000
Average Entry Level Salary
in US$ per Month (BPO)
US$350 – 450
Average Entry Level Salary in US$ per Month (ITO)
US$600 – 700
Real Estate Rental Cost 2008 (US$ per sq.ft)
US$2 – 4
Sample List of Major Service
Providers in the Country
Accenture, Capgemini, Citi, Convergys,
Deloitte, Dell, Fujitsu, HP, HSBC, IBM,
Intel, Infosys, JP Morgan & Chase, KPMG,
Microsoft, Motorola, Oracle, Samsung,
SAP, Siemens, Sony, Sun Microsystems,
Sykes, TCS, Teleperformance, Wipro
Primary Languages Spoken
Hindi, English
Other Languages Spoken
Tamil, Telugu, Kannada, Urdu,
Malayalam etc.
excellent by global standards. The process of attracting new
investments in the industry has been streamlined over the
years, supported constantly by developing infrastructure and
connectivity. Another major factor that has enhanced India’s
position are home-grown entrepreneurial ventures such as TCS,
Wipro, Infosys, Mahindra Satyam, HCL among others - which have
successfully proven themselves as reliable third party service
providers, in turn further attracting client markets. Additionally
the Indian domestic market has also made considerable progress
in the recent years, becoming a significant buyer of services for
both MNCs and Indian companies present in the country.
Another important accelerator is the presence of large captive
and shared service centers in India. Many large multinational
corporations have set-up base in India in the last decade and have
rapidly expanded operations. This provides strong aspirations to
the Indian labor force (especially the younger segment) to be a
part of the growth and opportunity in the industry.
Inhibitors
Even after the notable success that India has experienced,
there remain concerns which should be addressed. Some of
the major inhibitors for India are concerns about employability
and bureaucracy. Most corporations established in India have
observed that the large Indian talent pool has various levels of
competencies - while graduates from metropolitan cities and
top institutions match the best in the world, other graduates are
not up to the mark. This has proved to be a constant hindrance
towards the development of Tier II destinations in India along
with infrastructure issues and non-willingness of the talent pool
4
to relocate in these cities. The inability of the Tier II destinations
like Chandigarh, Kolkata, Coimbatore, Jaipur, Bhubaneswar
and Thiruvananthapuram to mature due to these concerns
have acted as inhibitors for the Indian outsourcing industry as
a whole as well. The academe has woken-up to this challenge
and modifications in the curriculum and education structure are
underway. For example, Accenture collaborated with the largest
Open University (IGNOU4) to design programs for the industry
which aims at producing a ‘more employable’ pool of graduates.
Other such initiatives in the field of skills development have also
been taken up by NASSCOM and other private corporations. On
the operational front, issues dealing with high attrition rates and
rising salary costs have been a growing concern to many providers
and clients.
Apart from the employability issues, isolated problems such
as corruption and bureaucracy in the government need to be
sorted out. Other aspects that need improvement are the security
threats and perception driven by terrorism and issues with the
business environment. Though, even after constant disruptions
on its borders - Pakistan and Afghanistan in the west, Bangladesh
in the east, Nepal and Tibet (Chinese conflict territory) in the
north and Sri Lanka in the south – India has been able to sustain
a relatively congenial sociopolitical and business environment.
However, these factors need to be further improved if India is
to take the next successful steps in solidifying its stature in the
services globalization space.
IGNOU: Indira Gandhi National Open University, is the largest open university in the world with most students enrolled and graduated annually
Page 7
Page 8
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Bangalore
Top 8
9
9
7
7
8
5
Delhi (NCR)
Top 8
9
9
7
8
9
5
Mumbai
Top 8
9
9
7
7
9
4
Chennai
Top 8
9
9
8
7
6
5
Hyderabad
Top 8
8
8
8
7
6
6
Pune
Top 8
8
8
7
7
8
6
Chandigarh
13
6
4
8
6
6
6
Kolkata
15
7
5
9
7
4
1
Coimbatore
18
5
4
9
5
4
6
Jaipur
29
5
3
9
6
4
4
The Philippines
While several offshore nations continue to battle their way into
the emerged destination list and despite growing competition,
the Philippines holds its ground as one of the more prominent and
established outsourcing hubs next to India. In 2008, the country’s
niche outsourcing offering - English language Contact Center
Services - employed more than 250,000 people and generated
about 70% of the country’s total US$6 billion in outsourcing
revenues.5
The growth of the Contact Center industry, which began in
earnest in 2001, has paved the way for other low to mediumvalue services to emerge in the country. The country graduates
about 400,0006 students each year (25% of which comes from
Manila NCR - the capital region) and with this sizeable labor pool
supplying the demand for the Contact Centers, it was simply a
matter of time before non-voice processes were included into
the country’s outsourcing portfolio. These have since grown to
include back-office processes in finance and accounting, human
resources, transcription (medical/legal), publishing as well as
animation. Though these other processes continue to make a
name of their own, the Contact Center space remains the flag
bearer of the country’s outsourcing industry.
Catalyst
The primary catalyst of the Philippines as a preferred offshore
destination is found in its employable labor pool for its main
service segment. According to the BPA/P,7 the Contact Center
industry has had a 45% YoY growth rate of employees over the
last five years. Even as Western economies began feeling the
effects of the global economic slowdown by end of 2007, the
Philippine Contact Center industry still increased its employee
size by 39% through 2008. Many of the largest companies in
global outsourcing have already made significant investments
and expanded in the country with third party providers now
including Accenture, Teletech, Convergys and Sykes. Captive
operators have likewise located in the country, many with
delivery centers across multiple city locations. This growing
list of captives now includes HSBC, Citibank and IBM - offering
Customer Support as well as various Back Office Processes.
According to CCAP, there were over 53 contact center companies
PHILIPPINES
Cities in Study
Bacolod City, Manila NCR, Mandaluyong,
Cebu City, Iloilo City, Pasig City, Quezon
City, Santa Rosa Laguna
Population (2008)
97.98 million
Annual Graduate Output (2008) 410,000 - 420,000
US$400 - 500
US$600 - 700
US$3-4
Accenture, Citi, Convergys, Dell,
eTelecare, Fujitsu, GE, HP, HSBC, IBM,
Intel, JP Morgan & Chase, P&G, SAP, Siemens, Sun Microsystems, Sykes, TCS,
Teleperformance, Teletech, Wipro
Tagalog
English, Cebuano
representing more than 80% of the total call center seats in the
country in 2008.
Accelerators
The available labor pool fit for the Contact Support industry, a
reliable infrastructure coupled with low labor cost, have served
as the country’s primary accelerators - propelling the destination
to the front of the global Contact Support space. The country’s
affinity with the US in terms of language and culture along with
similar legal/political structures has also provided the Philippines
an edge over destinations vying for the same service and
market.
Industry growth and business interest have also paved
way for much needed government support. An example is
the collaboration of different government bodies such as
the Department of Trade and Industry, the Commission on
Information and Communications Technology (CICT) and the
Philippine Economic Zone Authority (PEZA) in promoting “next
Source: Contact Center Association of the Philippines, Inc. (CCAP)
Source: National Statistics Office, Philippines
7
Business Processing Association of the Philippines
5
6
Page 9
wave cities” as viable locations to house outsourced services
outside the capital of Manila NCR. With the collaboration of
these government agencies together with participating local
government units, the next wave cities have developed into
alternative Tier II and Tier III destinations for many MNC’s
locating in the country. Another example is the formation of
various industry associations such as BPA/P, CCAP, MTIAPI9 and
PSIA9 to promote various outsourced services in the country.
With ample promotion of these “next wave cities” by the
mentioned stakeholders, cities not known in the international
outsourcing space such as Cavite, Santa Rosa, Bacolod and Iloilo
have emerged as feasible Tier II destinations. These Tier II cities
have since attracted larger players such as such as Teletech,
Teleperformance and SPi, to name a few.
Inhibitors
Being one of the first-movers in Asia in the voice-based Contact
Support space, the Philippines has however struggled in
8
9
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Manila NCR
Top 8
8
9
7
8
8
6
Cebu City
1
6
8
8
7
8
7
Medical Transcription Industry Association of the Philippines
Philippine Software Industry Association
Page 10
transitioning its outsourcing industry to the next level of highvalue services. Competing nations in the region for example,
have grown to successfully provide these higher margin services.
For instance, Vietnam is now seen as a destination for ESO while
Malaysia is gearing towards providing high value services in FAO.
China is also positioning itself in providing services across the
entire ITO value chain. While the competition across the region
heightens, Tholons believes that the primary inhibitor of the
Philippines remains its inability to provide the proficient labor pool
- necessary to compete with other offshore nations, and generate
skill-set specific labor required for the fulfillment of high-value
services. There will be an urgent, near-term need to bridge the
gap between the academe and the outsourcing sector in order to
address the evolving requirements of the market. Further, a recalibrating of the labor pool will be necessary in order to improve
skill-sets and employability. This will become even more crucial if
the country aims to finally transition and compete in the global
non-voice services market.
Another inhibitor can be attributed to the country’s inability
to produce large domestic service providers. Unlike India which
has produced its own MNCs such as TCS, Wipro, Infosys, HCL and
Mahindra Satyam - the Philippines relies heavily on international
third party providers or captive operations for sustaining industry
growth. The lack of entrepreneurial ventures has also inhibited
the development and evolution of many local players. Tholons
believes that local MNCs should eventually emerge, particularly
outside the country’s current niche Contact Support industry,
in order to sustain growth levels and more importantly – to
establish the Philippine image (and brand) as a global player in
the outsourcing space.
Ireland
Ireland has established itself as one of the premier shared
services centers in the world, delivering value for locators with its
excellent infrastructure and various shared services expertise (and
platforms). The country has evolved from being a regional support
center to becoming a regional hub for shared service centers in
the last decade. Its proximity and affinity to UK (second largest
client market) has helped the country establish as a nearshore
center for many European clients.
Further, the rising costs and currency appreciation in other
prominent offshore nations such as India and Philippines, along with
the rising service level maturity have reduced the cost advantage of
these nations versus nearshore destinations like Ireland.
Catalyst
One of the pronounced factors that has catalyzed the development
and evolution of Ireland as a premier offshore nation is its proximity
and affinity to client nations. Further, the country’s strong delivery
IRELAND
Cities in Study
Cork, Dublin
Population (2008)
4.20 million
US$2,500 - 3,000
US$3,300 - 3,500
US$6-7
Accenture, Dell, Fujitsu, IBM, Infosys,
Intel, Microsoft, Oracle, Sun Microsystems,
Teleperformance, Teletech
Irish
English
history in catering to the European telecommunication vertical,
and proficiencies in infrastructure and database management
services has provided the small island nation a unique advantage
in the region’s outsourcing space.
Ireland has also maintained its leadership in the shared
services segment and as a nearshore destination to the UK, with
its multi-language competence (beyond English) - it is most often
the destination of choice for setting up regional contact center
operations. Further, an excellent service delivery record enhances
the value proposition of Ireland for high-value shared services
such as R&D and Customized Application Development, and
especially for the financial, healthcare, legal, telecommunication,
and public sector verticals.
Accelerators
An accelerator for the country is also found in its robust intellectual
property laws. Outsourcing of confidential and sensitive
information and systems has always been a concern for buyers
of such services, and strong IP laws and stringent implementation
has been proven to induce client confidence. Moreover, the
excellent business environment that Ireland offers (in terms of
connectivity, infrastructure and affinity to the client nations) is a
great draw for the country. World class universities in the country
also produce talent which continues to fuel Ireland in delivering
high-value shared services.
Page 11
Though the current economic downturn has had a major
impact on employment, the country’s position (and reputation)
as a proven outsourcing destination will continue to sustain its
domestic outsourcing industry, and at least until the recovery
phase begins. With a reasonably affordable and highly skilled
talent pool, and the necessary infrastructure firmly in place, an
accelerated growth curve is expected by Tholons for the Irish
Inhibitors
The global slowdown has had a significant impact in Ireland and
its key client nation – the UK. This has proved to be the greatest
inhibitor towards the country’s progress last year. Since most
organizations are under tremendous cost pressure, it is even
more difficult for a country which is not the most economical
nearshore destination to provide an ideal value proposition.
Further, the emergence of other nearshore centers in Eastern
Europe has significantly increased competition for Ireland - with
niche skills offerings, capabilities and most importantly lower cost
Page 12
– being offered by many of the up and coming Eastern European
delivery locations.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Dublin
Top 8
7
9
3
8
9
9
China
China has again proven itself to have one of the fastest growing
and most progressive global economies in the last year. Though
China saw a YoY decline of 4% of its GDP, it still posted 9% GDP
growth rate by end of 2008 - a remarkable figure when considering
that most countries in the region (and across the world) were
struggling to merely sustain flat growth during the same period.
This gives indication to a stronger and more established economy
– which has now begun to look more at its vast domestic market
to fuel growth.
The sectors hit most significantly by the global downturn were
that of the manufacturing and export-related industries which
account for 60% of total GDP. The services sector on the other
hand, which comprise 32% of China’s GDP, also experienced
decelerated growth rate from 14.7% in 2007 to 9.5% in 2008.10
Though this is the case for the services sector, contract value of
China’s outsourcing industry – which is part of the said sector –
rose by 32.5% to US$2.6 billion in the first half of 2009.11 Industry
estimates indicate that the offshore and outsourcing industry in
China to be currently valued at around US$2.6 billion.
The ITO industry in China remains as its primary outsourcing
sector, offering a wide-array of high-end processes such as
Software Development, R&D and ADM, to low-value services in
Testing, Maintenance and Software Localization. BPO processes
are also offered in China but not as pronounced as its ITO
offerings. Some of the processes offered in this segment include
HR processes in CRM, logistics as well as low-end services in the
F&A space.
China’s outsourcing market provides a healthy spread of
services to the three main outsourcing segments – Offshore,
Nearshore and Onshore. As previously noted, contract value of
its outsourcing industry still posed significant growth at 32.5% giving indication of the spread of markets the country captures.
Even as the US and UK were hit hard by the economic crisis, the
deals China receives from neighboring countries help compensate
for embattled Western accounts. As an offshore destination, it
provides services to the US and UK which accounts for about
44% of total industry revenue. Services offered to the two client
nations are mainly low-end processes in ITO such as Testing and
Maintenance. Its second largest clients come from the nearshore
market of Japan and Korea which surprisingly accounts for a total
of 33% of revenues. The bulk of services offered are Engineering
CHINA
Cities in Study
Beijing, Chengdu, Guangzhou, Shanghai,
Shenzhen, Tianjin
Population (2008)
1.34 billion
Annual Graduate Output (2008) 5,870,000 - 6,000,000
US$350 - 450
US$500 - 600
US$4-6
Accenture, Capgemini, Convergys, Dell,
Deloitte, Fujitsu, KPMG, IBM, Intel,
Microsoft, SAP, Sun Microsystems, Sykes, TCS, Teleperformance, Teletech, Wipro
Mandarin
English, Shanghainese
Design as well as high-end ITO services for the automotive,
entertainment and chemical industries. Finally, 20% of revenue
is domestic driven - a mix of both ITO and BPO, with a majority of
revenue taken from the latter process, particularly in the Contact
Support space, and fueled by China’s large domestic market.
Catalyst
China’s strengths lie in two main factors - scalability and
competitive labor cost. In terms of scalability, China has an
incredibly vast labor pool catering to diverse industry sectors. For
instance, Beijing has a population of over 16.3 million residents
where 11.1 million are employed. The number of employed
people in Beijing is just about the same as the total population of
Manila NCR which is comprised of 16 cities. Even when compared
to some of the largest Eastern European countries, provinces in
China are often larger in terms of population - providing immense
scale in its talent pools. With about 1,900 HEI’s across 31 regions
in China, the country graduates more than 4.4 million students
each year,12 700,000 of which are IT professionals.
The second catalyst of China – which is translated by its large
labor pool – is its low salary cost. When compared to India, China
offers 10%-20% lower overall cost, making the China value very
Source: Asian Development Outlook 2009, Asian Development Bank 2009
Source: Ministry of Commerce, Republic of China
12
Source: China Statistical Yearbook 2008
10
11
Page 13
attractive. This dual value chain – scalability and low labor costs
- positions China in the Tholons Top 5 Established destinations
list.
Accelerators
The Chinese government has acknowledged the global
opportunity in the offshoring and outsourcing market and
has provided concrete incentives for outsourcing companies
establishing in the country – a definite accelerator for industry
growth and development. As an example, the Chinese government
announced in February of 2009, a suite of measures designed to
help the outsourcing industry over the next five years by providing
incentives to 20 pilot cities across the country (including Beijing,
Shanghai, Xi’an, Suzhou and Hangzhou). These incentives include
tax breaks of up to 25%, cash subsidies for outsourcing employees
and IP protection among others. The government has not only
Another significant accelerator for the Chinese outsourcing
industry is its own domestic market. Today, hundreds of smallmidsized providers in China busily contribute and amount to
20% of China’s total outsourcing revenue. The future growth and
success of the Chinese outsourcing industry may in fact rest on the
shoulders of these organizations. As these companies succeed in
fulfilling both international and domestic market demand – they
will in effect ultimately buoy China’s image and identity as a
premiere outsourcing destination.
Inhibitors
implemented incentives but has also provided for the building
of appropriate infrastructure, and developing a more conducive
business environment for the outsourcing industry. For instance,
a portion of the approved November 2008 stimulus package by
the Chinese government amounting to US$586 billion is slated
to be invested in developing China’s infrastructure, particularly
roads, railways, airports and power grids.13 It has also allotted
investments in technology upgrades in the IT & Services industries
through the creation of large technology parks dedicated to
outsourcing. Perception based initiatives have also helped
improve the image of the Chinese business environment, and
has been beneficial in providing more favorable propositions for
the repatriation (reverse migration) of skilled Chinese nationals
abroad. In fact, many Chinese nationals previously residing in the
West have begun returning to China - thriving and contributing to
the increasingly dynamic business ecosystem.
13
Page 14
One of the more pressing inhibitors for China revolves around its
issues with the labor pool’s employability (skill-set related). The
vast workforce can become inconsequential if large portions of
the pool are in fact unemployable by the outsourcing industry.
Specifically, the segment of the pool with less than adequate
levels of English proficiency and technical skill sets. Emphasis on
English has improved and there is progress in the right direction,
however there is still ways to go for China to fulfill its potential, as
it often remains inhibited by language and cultural barriers. For
example, China churns out an estimated 700,000 IT professionals
annually, far greater than India’s 300,000. Though this is the case,
China is still far behind India in the ITO services space. India’s
equally talented labor pool, its strong English capability, service
delivery maturity and familiarity in servicing Western clients (US
and UK in particular), give the country the momentary edge over
China in this particular outsourcing front.
In addition, the US government and many American companies
are still circumspect on outsourcing to China, especially when
IP and data privacy/security issues are concerned. Although IP
laws are increasingly being enforced in China - the country has
implemented a large body of legislation protecting IP, including
the Trademark Law of the People’s Republic of China, Paris
Convention Treaty, Copyright Protection Law and the Anti-Unfair
Competition Law - security considerations (including piracy) still
need to be further evaluated and dramatically improved.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Shanghai
2
7
7
7
8
8
7
Beijing
3
7
7
7
8
8
7
Shenzhen
9
6
6
8
7
7
7
Dalian
12
6
5
8
8
5
6
Guangzhou
24
6
4
8
6
5
6
Chengdu
33
6
7
8
6
5
5
Tianjin
43
5
5
7
6
5
8
Page 15
Brazil
Brazil is the largest economy in South America and is fast emerging
as a major player in the services globalization arena, due in part to
its huge technical talent pool and nearshore advantage. Brazil has
achieved excellence in Applications Management, Infrastructure
Managed Services and security technologies development along
with multilingual BPO capabilities. The high concentration of
post-graduates and PhDs also enhance the county’s attractiveness
for high-value services such as R&D and ESO. As the strongest
member of the MERCOSUR, Brazil also has a dominant role in
the macroeconomics of the region. The country’s large domestic
market for IT Services (IT-GNP of over US$20.6 billion, out of which
services account for over US$9.0 billion in 2007)14 has further
provided an easy-entry platform for outsourcing in the country.
Catalyst
The service delivery record for Brazil has been excellent thus
far, with large organizations showing confidence and continuing
to invest in the country. IBM, Intel, Microsoft, Accenture, Atos
Origin, BT, EDS, HSBC, Hughes, Mahindra Satyam, Siemens, Sun
Microsystems, TCS and Unisys are some of the major players
currently utilizing the available talent pool in various Brazilian
delivery centers.
Apart from the MNCs, regional and Brazilian organizations
such as Softtek, Stefanini, BRQ, ActMinds, Softex, Datasul, Itautec,
Politec, Promon, Tivit, Totvs, Virtus, Ubik and others, support the
dynamic business environment and serve as catalysts for the
nation’s outsourcing industry.
Accelerators
The main advantage that Brazil has is its large scale and availability
of experienced IT professionals. Overall the country accounts
for more than 1.7 million15 IT and software professionals. Deep
subject matter expertise and experience across platforms such
as Mainframe, UNIX, Linux, .Net, Java, Oracle, SAP, and Natural
Adabas - make Brazil an ideal location for various types of high-level
software development activities. For instance Brazil ranks second
(after the US) in the world per capital Mainframe population, with
an equally experienced pool of COBOL professionals present in
the country. This is one quality that organizations like IBM and
Sun Microsystems have capitalized on by locating in Brazil.
Brazil has an excellent academic system, producing an
14
15
16
Source: BRASSCOM, 2007
Source: BRASSCOM
Source: BRASSCOM, 2008
Page 16
BRAZIL
Cities in Study
Brasilia, Curitiba, Recife, Rio de Janeiro, São Paulo
Population (2008)
198.74 million
US$650 - 750
US$1,500 - 1,600
US$4-6
Accenture, Convergys, Dell, Deloitte, Fujitsu,
Intel, KPMG, SAP, Sun Microsystems,
Sykes, TCS, Teleperformance, Teletech,
Wipro
Portuguese
Italian, English
abundant and quality talent pool. As of 2006, Brazil had more
than 2,200 universities with over 6 million college students.
According to 2005 data from the Ministry of Education, 247,000
IT professionals graduate from universities and technical schools
in Brazil every year. The development initiative of the education
system is promising with more than 250 new technical schools
slated to be created by end of 2010. Post-graduate education
is equally well equipped. Brazil currently graduates over 6,000
PhDs each year. The education structure and course content has
also been updated in the last 3-4 years to align with industry
requirements - the success of this program has the potential to
positively impact the employability of its large talent pool.
The Brazilian Government has grasped the opportunities in
outsourcing and has implemented a National IT Program, which
after three years has produced satisfactory results, and shows
future promise. Brazil’s offshore outsourcing market turned over
an estimated US$1.4 billion in 2008, up by 75% from 2007.16 The
government has also initiated a federal structure of incentives for
the offshoring and outsourcing industry, with reductions on labor
charges and special income tax reductions given to organizations
implementing education/training and innovation in the R&D sectors.
Inhibitors
Even after the inherent strengths that Brazil has in the outsourcing
space, and derived from its vibrant domestic IT landscape - the
emphasis on the industry has remained surprisingly low. The
domestic market is largely the target of providers looking to
establish in the country with the offshore revenue for Brazil,
despite being on the upturn, still comparatively low. Its offshore
market - below the US$2 billion mark – gives indication to the
still unrealized potential and capacity of Brazil as countries in the
South & Central American regions, like Argentina, Chile, Costa
Rica and Mexico (without the large scale and potential of Brazil)
- are moving ahead at a relatively faster pace than Brazil. It should
be noted that the basic value proposition for outsourcing is
similar across the region (economical nearshore and multilingual
offshore destination) and Brazil has yet to realize its full potential
in this regard.
Another inhibitor for the industry is the weak intellectual
property laws which local authorities have now started taking
initiatives to address. However, the emphasis given to domestic
industry is changing and the paradigm shift towards offshoring
and has the potential to take Brazil to the Top Offshore Nation
status in the near term.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
São Paulo
8
7
5
5
9
9
6
Curitiba
11
5
6
7
6
6
8
Rio de
Janeiro
21
7
4
6
8
9
7
Brasília
41
5
4
6
8
6
7
Page 17
Next 5 Offshore Nations
Poland
Poland is emerging as a premiere nearshore shared services
center for Western European and Scandinavian client markets.
With its capabilities in serving the full spectrum of services
in both ITO and BPO spaces - Poland has emerged as arguably
the strongest competitor in the region for a spot in the Top 5
Offshore Nations list. While other countries in the region struggle
to develop and build a scalable/employable talent pool, Poland’s
population of almost 40 million and world class education system
- has successfully positioned its place among the top offshore
nations.
Catalyst
Offering both scale and quality of talent pool for BPO and shared
services centers, Poland has an estimated 500,00017 university
students in the fields of finance, business and administration.
It is hence home to large shared services centers belonging to
Citi, IBM, Lufthansa, Accenture, Philips, Teleperformance, Phillip
Morris, Shell, Maersk, etc.
A sizable pool of more than 350,00018 engineering students
from 18 technology universities has also attracted delivery center
set-ups in the country from organizations like Microsoft, IBM,
SAP, Lucent Technologies, Autos Origin, HP, Oracle, Samsung,
GSK, ADB, Siemens, Motorola, Delphi and Capgemini. Poland has
also matured in the service delivery front and has successfully
delivered as an R&D center for Intel, Google, Lucent Technologies,
GE, Samsung, Opera, Siemens, Alstom, 3M, Delphi, Avio, Pratt &
Whitney and ABB, among others. It is interesting to note that
Polish R&D captive centers not only serve software-derived
R&D, but also for aviation, embedded systems, automotive and
consumer electronics and telecommunication verticals.
Accelerators
The primary accelerator for the Polish outsourcing industry is
its scale and quality of talent pool. Poles are considered among
the best minds in software development, and local education
institutions provide world class talent - proven year after year
by young Polish IT specialists winning top places in international
programming competitions, such as ACM, the Imagine Cup and
Top Coder.
The success in the Contact Support domain is based on
the nation’s multilingual advantage as the learning of foreign
languages is obligatory in the Polish educational system. While
17
18
Source: GUS, Główny Urząd Statystyczny (The Central Statistical Office for Poland)
PaIiIZ: Polska Agencja Informacji i Inwestycji Zagranicznych (Polish Information and Foreign Investment Agency)
Page 18
POLAND
Cities in Study
Krakow, Warsaw
Population (2008)
38.48 million
US$1,200 - 1,300
US$1,600 - 1,700
US$5-7
Accenture, Capgemini, Citi, Deloitte, Fujitsu,
GE, IBM, Intel, HP, KPMG, Microsoft, Oracle,
Samsung, SAP, TCS, Teleperformance
Polish
English
English is the most popular foreign language among Poles with
almost 95% of the students opting to learn the language, other
languages such as German, French and Russian are also taken up
by a sizable number of students.
The apex body for attracting investments into the country
– PAIiIZ18 has done a commendable job in ensuring that Poland
remains a strong consideration in the minds of the investors
looking for Eastern European delivery locations.
Inhibitors
One of the more pronounced inhibitors for Poland is the
competition it faces within the region. Although investors realize
that Poland may offer a better scale and quality of talent pool,
they have also looked at smaller countries in the region which
often offer more economic operations. Moreover, though being
a part of the EU has helped Poland position itself better as a
nearshore destination - its competitors (Czech Republic, Slovenia,
Estonia, Latvia, Lithuania, Slovakia and Hungary) have also since
joined or applied into the Union– somewhat equalizing the value
proposition.
The larger cities of Poland – Warsaw, Krakow and Wroclaw
are also becoming increasingly expensive destinations in terms of
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Kraków
4
5
7
6
8
6
7
Warsaw
28
5
6
6
7
8
5
City
18
real estate and operational costs. However due to the excellent
infrastructure, low risk, congenial business environment and
scale/quality of talent pool, Tholons believes that Poland’s strong
and diverse value propositions will continue to materialize and
attract outsourcing players in the near term.
PaIiIZ: Polska Agencja Informacji i Inwestycji Zagranicznych (Polish Information and Foreign Investment Agency)
Page 19
Vietnam
Vietnam’s economic growth over the last several years has been
invaluable towards its emergence as a Next 5 Offshore Nation. For
instance, net FDI inflow to Vietnam reached US$6 billion in 2007,
up from US$2.3 in 2006. Further, even as the global economic
crisis took full swing towards the end of 2008, Vietnam’s GDP grew
by a decent 6.2% by year-end, just down from 8% posted in 2007.
The country’s economic dynamism is also attributed to its rapidly
maturing business environment. Vietnam is perceived as one of
the more vibrant destinations for ESO and Software Development
services in the Asian region. With sufficient and highly skilled
ICT graduates, the opportunity for Vietnam to strengthen its
ground in the mentioned service capabilities is considered high,
and given the country is not as saturated as competing nations
such as Singapore or even the Philippines in regards to the ITO
segment. Further, Vietnam has a larger and more capable ITO
talent pool than even larger neighbors like the Philippines or
Malaysia with ICT graduates in the country estimated at 30,00040,000 annually. Moreover, this opportunity will be magnified
once the India-ASEAN Free Trade Agreement materializes in
2009. With significant labor cost arbitrage in the country, India
will surely take advantage as it builds up its presence in Southeast
Asia (through Vietnam).
VIETNAM
Cities in Study
Hanoi, Ho Chi Minh
Population (2008)
86.97 million
US$300 - 400
US$350 - 400
US$6-7
Deloitte, IBM, Siemens, HP, Oracle,
Fujitsu, Intel, KPMG, Microsoft, SAP, Sun
Microsystems, Teleperformance
Vietnamese
English
Page 20
Catalyst
The primary catalyst of Vietnam’s emergence as an offshore
nation is accredited to the growth of the outsourcing industry
in Asia, particularly in India and the Philippines. With its specific
market offering ESO, it initially became a destination of choice for
MNC’s looking to cheaper alternatives in Southeast Asia offering
the same quality output. Though the majority of the IT companies
offering outsourced services are local third party providers,
there are also a number of key players already established in
the country - IBM, Intel, Oracle, HP and Fujitsu to name a few.
The primary client market for Vietnam still remains to be the
US; however several Asian clients such as Japan and China have
started to subscribe to Vietnam’s service delivery proposition.
Tholons believes that the challenge for Vietnam’s third party
providers will include mergers and acquisitions, and consolidation
activities required to boost its capacity in meeting growing global
client demand.
Accelerators
Strong government support has been one of Vietnam’s main
accelerators for growth in the outsourcing industry. Recently,
the government announced a US$55 million program to provide
skills development through education and training of ICT
professionals. The budget also has a provision for infrastructure
development by establishing high technology parks specifically
for the outsourcing industry needs. In addition, the government
also adopted a US$1 billion fiscal stimulus package in December
2008 to counter the global economic crisis. The package includes
several fiscal measures for 2009 including a reduction of 30%
corporate income tax for small and medium enterprises and a
50% cut on value-added tax on certain goods and services.19
19
Inhibitors
Vietnam needs to expand its outsourcing further by developing
Tier II & III destinations outside Ho Chi Min and Hanoi. Though
both Tier I cities have provided the necessary infrastructure
and labor pool to support the growing ESO/ ITO industry in the
country, growing competition in the Asian region remains a threat
to Vietnam. Developing these alternative locations in-country will
allow for more affordable delivery locations, which will enable
Vietnam to better compete against low-cost and emerging
neighbors. China in particular can compete with the cost and skills
availability in Vietnam, while possessing the significant advantage
of scale over Vietnam. Another major hindrance for Vietnam to
graduate into the matured destinations category is its inability to
improve its service delivery maturity.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Ho Chi Minh
City
5
6
7
7
7
7
8
Hanoi
10
5
6
7
6
5
7
Page 21
Canada
An interesting characteristic of Canada’s outsourcing industry
is evidenced in the fact that despite its relatively higher costs
compared to other nearshore destinations south of the US, such as
Mexico and Costa Rica - Canada remains an attractive investment
site for service providers. This is due to the wide array of outsourced
services the country provides which includes low-end services in
Customer Support to high-value shared services centers. However,
the country’s niche service continues to be of high-value services
in FAO, Engineering Services as well as ITO related processes in
Applications Development and Management, Testing and R&D.
Several area clusters in the country house outsourcing hubs such
as Toronto, Halifax, Calgary, Montreal and Vancouver.
Catalyst
Canada’s primary catalyst as an outsourcing destination is its
proximity and affinity to the US - its primary and largest client. Aside
from the two country’s cultural and business affinity, all the major
outsourcing centers of the country are located along only four
different, yet shared time zones with the US. This scenario gives
greater ease in management of remote locations. This scenario has
served as a draw for a number of US companies to locate in Canada.
For instance, Microsoft established one of its software development
centers in Vancouver citing that a key point in the decision process is
the proximity of the city to its headquarters located in Washington.
In addition, the country’s stable business environment serves as
a positive catalyst, especially for large American companies.
CANADA
Cities in Study
Halifax, Toronto
Population (2008)
33.49 million
US$2,500 - 3,000
US$4,000 - 4,500
US$2-4
Accenture, Capgemini, Convergys, Deloitte,
EDS, Fujitsu, IBM, Infosys, KPMG, Oracle,
SAP, Sun Microsystems, Sykes, TCS,
English
French
With a modern infrastructure of road networks, air travel and
telecommunications service - Canada provides the requirements
world class businesses demand for business operations. Service
providers established in Canada include the Big 3 of India (Wipro,
TCS and Infosys) as well as other MNC’s such as IBM, Convergys,
Capgemini, EDS, CGI and Accenture.
Accelerators
What has propelled Canada to being one of the more established
nearshore destinations is the excellent quality of output by its
labor pool. Aside from providing the necessary talent the industry
requires through ample supply of IT graduates, parallel industry
segments have also helped build-up its ITO and KPO industries.
For instance, the Engineering Services sector of Canada employs
over 85,000 workers which can be tapped by the ESO segment.
Another factor which has made Canada a hotbed for outsourcing
is the secure business environment it provides service providers.
This is bolstered by the country’s stable political and economic
environment, two elements lacking in many of the cheaper
offshore alternatives. Further, security threats related to
terrorism or political turmoil are also not as pronounced in the
country as it is in other developing nations. This gives Canada
an advantage over nearshore competitors as well as offshore
destinations. Another accelerator for Canada is its own domestic
Page 22
market. Establishing in a safe location such as Canada allows
providers to not only achieve relatively predictable (and high
quality) results, but also provides access to profitable local
markets.
Inhibitors
Though Canada is considered to be one of the more mature
outsourcing destinations - particularly because of its characteristic
as a nearshore shared service Center of Excellence for the US –
the country has been relegated to a Next 5 outsourcing location
position this year. One of the inhibitors of Canada’s outsourcing
sector lies with its high labor costs compared to other nearshore
and/or offshore destinations. This disadvantage may become
even more compounded as more affordable offshore destinations
begin to improve service delivery models and expand service
portfolios. Labor cost in Canada is only 10-15% cheaper than
the US, and when compared to destinations such as India or the
Philippines, where labor cost savings can go as high as 70-75%.
This inhibitor was magnified last year as the US experienced
currency volatility. Further, since Canada is inherently tied to the
US economy, it was also hit hard by the cut backs and closures
of businesses in the US. In specific cases, service providers
transferred processes previously allocated to Canada, to lower
cost destinations in Asia and South America.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Toronto
23
8
8
2
9
9
8
Halifax
45
6
5
3
9
8
8
Page 23
Mexico
With a business landscape centered on manufacturing and
historically catering to the U.S. market, Mexico has slowly added
outsourced services into its business portfolio. The country
is considered to be one of the Next 5 Offshore destinations
- an attribute owed to its favorable nearshore characteristics.
Outsourced services in the country started with voice-based
services catering to both English and Spanish speaking clients.
This attribute – the provision of multilingual capabilities
– distinguishes it from Asian competitors such as India and the
Philippines. Industry figures show that Mexico was composed of
an estimated 50,000 agents engaged in multi-lingual (Spanish and
English), BPO work in 2008. Though one of Mexico’s strength is
in its bilingual voice-based service, it is also apparent that high
value services are beginning to emerge in the country. There are
more than 500,000 IT professionals who currently work for the
country’s IT industry. This sizeable pool can be potentially tapped
for its growing ESO and ITO industries. For instance, TCS, one
of India’s leading IT companies, has established three delivery
centers in Mexico in the areas of Mexico City, Guadalajara and
Queretaro with plans of reaching 12,000 employees by 2012.
Catalyst
The North American Free Trade Agreement of 1994 between
the US, Canada and Mexico is one of the main catalysts for the
country in becoming an established outsourcing hub. As the only
developing economy in the agreement, it was able to open avenues
of investments from two of the worlds’ largest economies, and as
NAFTA theoretically removed trade barriers amongst the three
nations. Foreign direct investments from 1988-1993 averaged at
US$4.5 billion, ballooning to an average of about US$13 billion
from 1994-2002. Recent data shows that in 2007 alone, FDI flow
to Mexico reached US$24.7 billion. Though industry estimates
reveal that more than half of the investments are directed towards
assembly or manufacturing (maquiladora) facilities, there is little
doubt that it has helped propel the country’s economy as a whole,
and the outsourcing sector in particular.
Another catalyst of Mexico’s emergence as a Next 5 destination
lies specifically with the distinct characteristic of its labor pool
in providing multilingual capability in the English and Spanish
vernaculars. With this skill-set in place and as the demand for
Contact Support for both the English and Spanish language rise,
the potential of the country in the Customer Service space has
continued to materialize.
Page 24
MEXICO
Cities in Study
Mexico, Monterrey, Guadalajara
Population (2008)
109.96 million
US$750 - 850
US$1,350 - 1,450
US$2-3
IBM, Accenture, HP-EDS, Fujitsu, Intel,
Oracle, SAP, HP, KPMG, Deloitte,
Capgemini, Sun Microsystems, Teletech, Teleperformance, TCS, Infosys, ACS
Spanish
English
Accelerators
With sustained investments flowing into the country and as
the outsourcing industry slowly matures, Mexico has become
a strong competitor to Canada as a nearshore destination. One
of the accelerators for this advancement is the growth of the
Spanish speaking population in the US, which is estimated to
be at 42 million according to the 2005 US Census. This specific
demand brought by the American Spanish speaking market, has
driven the demand for bilingual agents which Mexico supplies
and which Canada for example, would be lacking. In addition,
even the Philippines, which continue to be the leading Contact
Support destination - cannot offer what Mexico has – an
abundant supply of agents with multilingual capabilities. This
separates Mexico from other voice-based locations who are
only able to provide English-based services. This can be noted as
Mexico’s underlying advantage in the BPO space. Its nearshore
characteristic to the US has also proven to be an accelerator with
several US companies choosing Mexico over regional delivery
centers such as Argentina, Chile and Costa Rica. The Contact
Support industry employed more than 180,000 by end of 2007,
60% of which come from Mexico City, Guadalajara and Monterrey.
Some of the larger Outsourcing companies established in Mexico
include Accenture, Genpact, Teletech, Sitel, Teleperformance
and Convergys.
Inhibitors
One of the country’s more recognized inhibitors is found within
its Risk Parameter - specifically related to security issues stemming
from illegal narcotics. For instance, Juarez, which lies near the
border of Texas, was considered by Tholons as an emerging
Outsourcing destination in 2007. However, due to constant drug
cartel problems faced by the city and the security threat it poses
the city’s inhabitants, Juarez has since been surpassed by other
emerging outsourcing destinations. Though Tholons sees that
this does not gravely affect firms which are already established
and operating in the country, the perception of Mexican cities of
having a high security risk profile can be detrimental to its image
as a stable outsourcing or offshore destination - more so now that
competition in South America from Chile, Brazil and Argentina have
emerged to pose a real threat to Mexico’s niche markets/clients.
City
Rank 2008
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Mexico City
26
7
7
6
7
7
6
Monterrey
37
6
5
6
7
6
6
Guadalajara
39
5
5
7
6
7
7
Page 25
Russia
Russia continues on the path on becoming one of the leaders for
hi-tech R&D outsourcing in the world. Russia’s deepening service
delivery expertise and rich talent pool has made the country a
research factory for top organizations like Intel, IBM, Motorola,
Samsung and Google. Being a part of the Eastern European
outsourcing region has also enabled Russia to collectively share
the niche service characteristic for the offshoring and outsourcing
industry. Russia however stands out in the region due to its
capacity to fulfill large-scale, high-value services, though the
processing of such services are coming at an increasingly
higher cost (as compared to smaller Eastern European delivery
locations).
Catalyst
The two major catalysts that have enabled Russia to be considered
among the Next 5 Offshore Nations are its stabilizing economy
and rich talent pool. The relationship with US has also taken a
positive shape, post cold war – though can be further improved.
In addition, bilateral treaties and progressive trade relations
between the countries have helped take Russia to the next level
among the Offshore Nations.
The three major destinations in the country (Moscow, St.
Petersburg and Nizhny Novgorod) have developed into strong
clusters for high-value services such as R&D, Embedded Systems
RUSSIA
Cities in Study
Moscow, Nizhniy Novgorod, St. Petersburg
Population (2008)
140.7 million
Annual Graduate Output (2008) 1,990,000 - 2,000,000
US$750 - 850
US$1,400 - 1,500
US$11-12
IBM, Accenture, HP-EDS, Fujitsu, Intel,
Oracle, SAP, HP, KPMG, Deloitte,
Capgemini, Sun Microsystems, Convergys,
Teleperformance
Russian
English
Design, ESO, Advanced Programming, Complex Simulation and
various automation processes. Complex processes in financial
services are also being outsourced to Russia. These have grown
to include Portfolio Systems Management, Risk Management,
etc. It must be noted that for similar high-value work, the Russian
destinations offer anywhere from 5%-15% net cost differential
when compared to the client nations in Western economies.
Accelerators
The prime accelerator for Russia in the offshoring and outsourcing
industry can be found in the abundance of qualified talent,
capable of executing high-value services from the country. The
emphasis on technical education in Russia has always been very
strong and that continues to attract high-value work into the
country. Moreover, the major Russian cities have become clusters
for world-class technical education, which adds to the influx of
new talent into the labor force, already loaded with experienced
resources.
Inhibitors
The quality of output and talent pool is comparable to client
nations such as the US and the UK - however costs are also now
Page 26
increasing. Moving towards the outskirts of the city clusters
(like Zelenograd instead of Moscow) means significantly lower
operational cost. This is one of the reasons why city clusters have
emerged in Russia (as explained in the subsequent section, Cities
as Clusters).
The rising cost of living is also another emerging inhibitor for
Russia. Hence, it is fast evolving that only high-value processes
may become the only feasible service to be delivered out of the
country. This means that only a fragment of the talent pool can
be utilized by the outsourcing industry if the trend is not changed.
Though IP laws have improved in the last decade, this area
remains an inhibitor for Russia is its weak IP laws are handicapped
by less than stringent implementation. To address this issue,
Russia has undertaken a large-scale IP law reform. The reform
abolishes most of the existing IP legislation and instead puts all
IP issues into the new Fourth Part of the Civil Code. The new
legislation was signed in 2006, but it was only made effective
in January of 2008. This is significant since the high-value
processes being performed out of the country (R&D and
innovation-based processes) are highly sensitive and require
strong IP control and protection.
The independent Russian software industry consists of
small firms with only a few domestic firms having over 1,000
employees. This inability of the domestic Russian outsourcing
industry to create their own MNCs has acted as a hindrance
for outsourcing in the country. However, despite their size
limitation, Russian firms have won business from important
customers, including Boeing, IBM, Dell, and Citibank.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
St. Petersburg
31
8
5
3
8
9
5
Moscow
38
9
5
2
9
9
5
Page 27
Emerging 20
Offshore Nations
Argentina
Over the past five years, Argentina has continued to improve
it credibility and capability in the global outsourcing arena.
However, significant success of other key competing markets
such as India and China and closer home, of Chile, has resulted
in a greater need to accelerate the pace of growth of outsourcing
in Argentina. The country has developed into one of the top
destinations in South American with its multilingual capability
and nearshore advantage. Numerous factors have led to the
country’s success in the offshore outsourcing space:
• Robust Infrastructure. The local telecommunications network
has expanded and evolved according to requirements. As a result
of increased ICT investments and development, state-of-the-art
technology and infrastructure is available to companies looking
to establish voice, e-mail, chat, VoIP, and other web-based
services in the country.
• Bilingual Capability and Cultural Affinity. The global Spanish
market has continued to grow and has become one of the fastest
growing buyers of outsourced services. Growing demand from
Spain, as well as support services from the US Spanish speaking
consumer market, continue to be drivers for Argentina’s
• Experience in Outsourcing. A number of multinationals such
as IBM, AOL, Marriott Hotels and American Express have taken
advantage of Argentina’s inherent capabilities to establish
Contact Support operations in the country. As more global
corporations expand operations in Argentina, the country’s
image as an outsourcing location continues to be bolstered.
• Market Access to International and Regional Markets.
Argentina has a strategic location to both international
markets (US, Spain) and regional economies – both considering
Argentina as a nearshore destination. Located in the heart of
South America also gives the country direct access to potential
rich neighbors such as Brazil, Chile and Paraguay.
Argentina’s Software & IT Services Chamber of Commerce
(CESSI) is the lead association promoting outsourcing in the
country, and has done a commendable job in promoting the
nation as a global delivery center. According to the CESSI,
the industry will see a 90% growth by the year 2016, creating
a minimum of 70,000 new jobs and reaching export revenues
of US$3 billion. The CESSI has also defined a roadmap for the
period 2004-2014, which defines the key issues to be addressed
in order to invigorate IT industry growth. The guidelines of the
Page 28
ARGENTINA
Cities in Study
Buenos Aires, Cordoba
Population (2008)
40.91 million
Annual Graduate Output
(2008)
220,000 - 235,000
US$550 - 650
in US$ per Month (ITO)
US$1,100 - 1,200
Real Estate Rental Cost
2008 (US$ per sq.ft)
US$4-6
Sample List of Major Service Accenture, Capgemini, Convergys,
Deloitte, EDS, IBM, Intel, KPMG, Oracle,
Siemens, SAP, Sun Microsystems,
Sykes, TCS, Teleperformance, Teletech
Primary Language Spoken
Spanish
Italian, English, German, French
Emerging 20 Offshore Nations
2008–2011 Software Industry Sectorial Action Plan works as
complement to a previous 2004 roadmap wherein the sector
defined its strategic 10 year plan. CESSI has moreover helped
Argentina position itself in the international market as a quality
software exporter, with prestigious education institutions
providing a rich talent pool.
Though the nearshore proposition will continue to attract
investments into the country and as the ability to deliver more
complex judgment-based processes are developed by the local
industry – Argentina in the long-term will be hard pressed to
compete against larger offshore destinations such as India and
to an extent, Brazil. This is largely attributed to the limitations of
scale which Argentina’s labor pool presents. Near-term expansion
is predicted however and a number of promising locations in the
country have benefitted from the following factors:
• Growing pool of skilled laborers geared for Spanish-
content delivery (ITO and BPO)
• Robust Telco and IT infrastructure
• Time Zone compatibility with North America
• Government and legislative support for outsourcing
• Highly competitive prices for a nearshore destination (as a
result of the 2002 Peso devaluation)
Realizing the potential impact of outsourcing to the country’s
economy, the Argentine Government has launched several
initiatives to support the industry and ensure compliance with
international standards in terms of applicable ICT-related laws
and intellectual property protection. In order to promote the
sector, the Ministry of Economy issued in 2004 the Industrial
Promotion Law, which gives tax benefits to software companies.
Also, the National Science and Technology Promotion Agency
offers an assistance program known as FONTAR, which provides
financing and assistance to new technology projects for market
entry. Currently, the country’s IT sector employs almost 50,000
people - with more than a third coming from the ITO industry. Its
BPO industry in the other hand employs around 40,000 people.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Buenos Aires
6
6
7
5
7
9
5
Page 29
Egypt
Egypt is positioned as a high quality, low-cost, multi-language
destination and Tholons foresees accelerated growth in the
country’s offshore outsourcing industry in the near-term.
Government set an ambitious goal in 2005 to quadruple its
revenue to US$1.1 billion from the global outsourcing market by
2010. Egypt is already a base for multinationals like Cisco, Google,
IBM, Microsoft, Oracle and Orange Business Services – all availing
of Egypt’s growing IT labor force. Egypt has the competencies
and potential that could make it a major outsourcing provider in
the Middle East and Africa region.
Some inherent advantages which Egypt posses as an offshore
outsourcing destination are:
• Time Zone and Multilingual Skills. Favorable time-zone and a
wide spectrum of multilingual talent are two unique features of
Egypt’s outsourcing proposition. English, French, Italian, Spanish,
Portuguese, Russian, Hebrew and Arabic speakers are available in
various capacities.
• Geographical Location. Egypt’s proximity to Europe is highly
advantageous, making it a suitable nearshore destination for
both the European and Middle East markets.
EGYPT
Cities in Study
Alexandria, Cairo
Population (2008)
83.08 million
(2008)
95,000 - 110,000
US$550 - 650
US$700 - 800
US$3-5
Sample List of Major Service Convergys, Deloitte, Fujitsu, IBM, KPMG,
Microsoft, Oracle, SAP, Sun MicrosysProviders in the Country
tems, Teleperformance, Wipro
Arabic
English, French
• Growing Workforce. High annual influx of graduates in Egypt
provides high-quality, low-cost resources for service providers in
the country.
• Communications and IT Infrastructure. Egypt has one of the
best ICT infrast ructures in the Middle East and Africa region,
lending the country a considerable advantage over other
regional suppliers. The country is also connected to international
telecommunication infrastructure via three major submarine
fiber-optic cables.
• Government Support. The Egyptian government has been very
supportive of the industry, providing tax breaks, establishing
free trade zones to encourage investment, and even providing
training for outsourcing workers. As in other successful BPO
supplier countries, the government has played a crucial role in
the success of the industry in Egypt. The Information Technology
Industry Development Agency (ITIDA) is the lead agency tasked
to support the industry.
Tholons views that efforts must be sustained in the following
Page 30
fronts to ensure continued growth of the country’s still nascent
outsourcing industry:
• Infrastructure development across major city centers
• Improve and promote technical education across the country
• Enable and encourage companies to obtain appropriate training
(language and accent training) and certification (specific for
high-value service delivery)
• Develop alternative outsourcing destinations beyond Cairo and
Alexandria
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Cairo
7
7
5
7
8
8
6
Alexandria
48
7
3
7
7
5
3
City
Page 31
Czech Republic
The Czech Republic’s real GDP grew by 3.2% in 2008 which is
lower compared to the 6.0% CAGR average from 2005 to 2007,
and is seen as a result of the global economic slowdown. Though
the country’s GDP was affected by the recession, economic
performance is still on a positive track, driven by robust domestic
demand, strong private consumption and continuous FDI
inflow. Private consumption – fueled by rising real wages and
employment – accounted for nearly one-half of GDP growth. On
the other hand, FDI inflow registered a mere 4% in 2008 after
being one of the highest gainers in Eastern European at US$7.6
billion inflow in 2007, up by 27% from 2006.
Despite being only one-fourth the size of Poland in terms
of population, the Czech Republic has continued to attract
investments and outsourcing companies to establish in the
country. The Czech Republic has a number of favorable factors
which has resulted in its emergence in the services globalization
radar. Germany, the UK and Finland are considered as major
clients.
The advantages and strengths of the Czech Republic can be
summarized as:
• Low geopolitical risk
• Strategic,geographical proximity to Germany and other
Western European client nations
Page 32
CZECH REPUBLIC
Cities in Study
Brno, Prague
Population (2008)
10.21 million
(2008)
78,000 - 85,000
US$950 - 1,050
US$1,400 - 1,500
US$3-5
Sample List of Major Service Accenture, Capgemini, Deloitte, EDS,
Fujitsu, IBM, Intel, Infosys, Microsoft,
KPMG, Oracle, Siemens, SAP, Teleperformance
Czech
Slovak
• Cost advantage compared to other Eastern European
destinations
• Language and cultural compatibility
• Robust Telco infrastructure
While the basic deterrents are due to the following weaknesses
and challenges:
• Limited labor pool compared to larger neighboring countries
• Inadequate enforcement of IP laws
• Effects of rising inflation (post EU membership)
• Competition for talent pool across industries
The country has been able to adequately address many challenges
by providing additional investments to its outsourcing industry.
This in turn has attracted names like Accenture, Siemens, Exxon
Mobil, Infosys, and Dell in the Contact Support segment while
others like Red Hat, Google, Sun Microsystems, LogicaCMG and
SAP have begun performing R&D and Software Development out
of the country. IBM also has large centers performing both BPO
and ITO processes from the Czech Republic.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Prague
14
6
7
5
8
8
7
Brno
30
3
8
5
8
6
8
Chile
Chile has become one of the most talked about global destinations
due to the recent surge of investments into its offshore outsourcing
segment - Chile is rated by Tholons as one of the most promising
countries in the region. At the recently launched WEF Global
Competitiveness Report,20 the country was regarded as one of
the most stable and competitive economies, ranked first in the
region and 30th overall in the World Competitive Index in 20092010 out of 133 economies. It also garnered other accolades in
the study such as having sound macroeconomic fundamentals,
efficient and transparent government, developed infrastructure,
and a highly developed business sector. Likewise, being a Free
Trade Agreement member in the region, with policies in place to
address intellectual property rights and favorable tax incentive
levers - further enhances Chile’s attractiveness as an outsourcing
nation. Some companies who have established delivery centers
in the country include Accenture, Oracle, TCS, Teleperformance,
Citigroup and JP Morgan.
CHILE
Cities in Study
Santiago
Population (2008)
16.60 million
(2008)
87,000 - 95,000
US$600 - 700
US$1,450 - 1,550
US$3-5
Sample List of Major Service Accenture, Deloitte, IBM, Intel, KPMG,
Oracle, SAP, Sun Microsystems, TCS,
Teleperformance, Citi, JP Morgan and
Chase
20
Spanish
English
The Chilean Government has set target revenues of US$1.0 billion
for its outsourcing industry by 2010. Their key focus is on the
development of human resources, improving the regulatory
framework to suit the industry and provide economic incentives
to investors. Steps taken by associations like the Chilean Economic
Development Agency (CORFO) and Information Technology
Association of Chile (ACTI) to promote its nearshore outsourcing
platform have already started yielded results.
Summarizing the major advantages of Chile in the outsourcing
arena:
• Excellent Business Catalyst. A large number of global
corporations have located in the country and Government support
has been adequate in providing a stable business environment.
• Excellent Labor Resources. Availability of adequate, economical
and skilled labor force, with experience in outsourcing.
• Nearshore Advantage. Its nearshore advantage is coupled with
excellent cultural compatibility, multilingual skills, and time zone
convenience for North & South American clients.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Santiago
16
6
7
6
7
8
7
World Economic Forum Global Competitiveness Report 2009
Page 33
Sri Lanka
The Sri Lankan economy has grown by an average of 5% during
the last decade. According to figures from the Sri Lankan Central
Bank, the economy was estimated to have grown by 6% in 2008,
although the inflation rate has climbed recently, rising to 18.8%
by March 2008. The tourism and the fishery industries comprise
the majority of the local economy. Agriculture and other agrobased industries are also present but on a much smaller scale.
The economy was briefly buoyed by an influx of foreign aid and
tourists, but this has been disrupted with the reemergence of
civil war - resulting in an atmosphere of general lawlessness
in the country and an eventual decline in tourism. For nearly
two decades, the island was scarred by a bitter civil war arising
from ethnic tensions. A ceasefire was signed in 2002, but it was
undermined by regular clashes between government troops
and Tamil rebels, and in January 2008, the ceasefire expired.
Disruptions in Colombo and other parts of Sri Lanka have changed
the business climate in the country in 2008. Since the perception
towards a country’s security and risk is essential in assessing
emerging destinations in the region, investors and service
providers have become wary of the political and social risk that
Sri Lanka pose to their business even though the country is in a
relatively stable condition following the events in 2008. Hence,
Colombo has dropped down from the 7th spot in 2007 to 19th
place in 2008 and only slightly gained ground in 2009 to the 17th
SRI LANKA
Cities in Study
Colombo
Population (2008)
21.32 million
(2008)
10,000 - 15,000
US$300 - 400
US$500 - 600
US$3-5
Sample List of Major Service Convergys, HSBC, IBM, Intel, Microsoft,
Oracle, Sun Microsystems
Tamil
English
Page 34
spot.
Despite such adversity, Sri Lanka’s outsourcing industry has
continued to make inroads. Earnings from exports of software
products have shown a steady upward trend during the past
decade, rising from only US$5 million in 1996, US$66 million in
2001 to an estimated US$98 million in 2006. Sri Lanka’s Software
Exporters Association has set an aggressive national target of
US$1 billion in export revenue by 2012.
The country’s emerging outsourcing industry is developing
a reputation as a global destination in the fields of software
development, customer support and FAO services. The industry
is estimated to be comprised of around twenty-five larger
companies, and has recently attracted international groups such
as HSBC, WNS Global Services, Western Provident Association
and Office Tiger – most of which have recorded positive growth
in their Sri Lankan operations. The local software development
industry is predominantly export-oriented with nearly 75% of
the companies exporting the entirety of their services. The two
leading clients for Sri Lankan outsourced services are the US and
UK - followed by Australia, Sweden, New Zealand, Hong Kong,
Singapore and Japan.
Sri Lanka’s primary selling points for the offshore outsourcing
market are the low labor and operating costs in the country. A
recent World Bank study for example, revealed that the country’s
labor costs ranked lowest globally in comparison to other
outsourcing destinations.
Further, Sri Lanka has the distinctive characteristic of having the
largest available pool of British-qualified accountants outside of
the United Kingdom. This provides for a unique opportunity for
the country to position itself as a provider of financial services to
the UK. The government has to lower the country’s risk profile
while trade organizations have the responsibility of encouraging
entrepreneurial ventures in the sector in order to retain talent in
the country - as Sri Lanka faces a major threat of labor migration.
A meticulously planned and implemented roadmap can drastically
change the direction of Sri Lanka as an outsourcing destination.
Though Sri Lanka has the advantage of cost, problems with the
country continue to be found in the Infrastructure and Risk Profile
categories where it registers lower scores. Its Telco infrastructure
is adequate at the moment (though expensive compared to
neighboring India) - if the destination is to develop, it will be
imperative that infrastructure be improved and bandwidth costs
made more economical.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Colombo
17
5
4
9
6
6
4
Page 35
South Africa
SOUTH AFRICA
Cities in Study
Johannesburg
Population (2008)
49.05 million
(2008)
125,000 - 135,000
US$1,100 - 1,200
US$1,500 - 1,600
US$2-3
Sample List of Major Service Deloitte, EDS, eTelecare, IBM, Intel,
KPMG, Microsoft, Oracle, SAP,Siemens,
Sun Microsystems, Sykes, TCS, Teleperformance, Teletech
21
Afrikaans
English, Ndebele, Pedi, Sotho
Source: DTI, South Africa
Page 36
South Africa is one of the world’s most promising
emerging markets. The unique combination of a
developed infrastructure and growing domestic
economy has given rise to a strong entrepreneurial
and dynamic business climate. In the recent UNCTAD
World Investment Report for example, South
Africa was rated as the most attractive destination
in the continent for transnational corporations.
Furthermore, economic dynamism is evidenced by
the FDIs directed towards its ICT sector, which have
since overtaken the share allocated to the more
traditional mining and extraction industries.
South Africa is also emerging as a favored
international location for outsourcing. Identified as
a key sector in the government’s strategy to boost
the country’s economy and create employment BPO and offshore outsourcing is forecasted to create
25,000 direct and 75,000 indirect jobs in South
Africa in the near term. This figure will contribute up
to US$1 billion to the national economy by end of
2009.21 ITO is also a growing sector in South Africa. This is fueled
by a diverse local market and highly educated talent pool. ADM,
testing and the entire gamut of ITO services are successfully
being delivered by MNCs such as EDS from South Africa. Renault
(Engineering), Siemens (R&D), PriceWaterhouseCoopers, KPMG,
AC Nielsen and Ernst & Young on the other hand are utilizing
the analytical ability of country’s talent pool to deliver Financial
Analytics and FAO services.
For international firms, South Africa is viewed between nearshore
locations such as Canada, Mexico and Eastern Europe - which offer
close proximity as well as cultural affinity to domestic markets and India and the Philippines – more traditional destinations that
offer cheaper labor.
South Africa has the following ecosystem components working
in its favor:
• Talented labor pool capable of world-class delivery services
• A broad base of management and service provider expertise,
coupled with extensive financial services capabilities (particularly
in insurance, mortgage and loan processing and collection)
• Time-zone compatibility with Europe
• High fluency in English, with neutral accents that are easily
understood in Western markets
• Strong government support and State provided incentives,
such as start-up and expansion grants and discounted
telecommunication rates
With regards to infrastructure, the South African government has
taken steps to ensure the necessary provisions for bandwidth
and international connectivity. Major projects are under way
to lay submarine fiber-optic cables along both the east and west
coasts of South Africa to boost the continent’s communications
infrastructure.
Other recent investments include Royal Dutch Shell’s deployment
of a contact center in Cape Town. The center will service Shell’s
customers in Belgium, Luxembourg and the Netherlands, with
native Afrikaans-speaking operators trained to converse in
Dutch and Flemish. International companies that have already
chosen South Africa as an outsourcing destination include IBM,
Fujitsu Siemens, Lufthansa, Virgin, Sykes, Avis and the Car Phone
Warehouse.
Tholons views that the critical factors that South Africa must
address to maintain its growth in the contact center industry are
to limit inflation, invest in skills training to contain attrition rates
and better manage communication and labor costs.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Johannesburg
19
8
4
5
9
8
7
Page 37
Costa Rica
The growth of Costa Rica as an offshore outsourcing hub began
with the surge of its high-tech manufacturing industry, and led by
electronics giant Intel. With the development of the electronics
sector, the outsourcing industry emerged as another service
offering of the country. Consequently, this also led to the growth
of other BPO services, from back-office and shared services
czatering to industries in the BFSI and technology sectors.
Outsourcing in Costa Rica is most evident in back-office processes,
shared services and voice based-Contact Support. A driver for
this growth has been the backing of Costa Rica’s investment
promotion agency, CINDE (Costa Rican Investment Promotion
Agency). With the steady development of BPO in the country,
CINDE began attracting foreign investors. The agency also used
its bilingual workforce as a prime selling point, resulting to the
growth of Costa Rica’s voice-based services with companies such
as Sykes, HP BPO, ICT, and Teletech locating in the country.
Intel’s venture in Costa Rica in 1997 was believed to have been
driven by three essential factors – low labor cost, proximity to
the US and availability of labor pool. The company’s decision
to locate in the country also placed Costa Rica on the map of
other multinationals
with
conglomerates
such as HP, Abbott
Laboratories, Proctor
& Gamble, Sykes and
Western Union later
following the footsteps
of Intel.
With the multinationals
locating in Costa Rica
as well as increasing
local
investments
supporting
the
outsourcing industry,
the
government
has been quick to
augment spending on
22
Cities in Study
San José
Population (2008)
4.25 million
(2008)
11,000 - 15,000
US$600 - 700
US$1,300 - 1,400
US$2-4
Sample List of Major Service Convergys, Deloitte, Fujitsu, HP, IBM,
Intel, KPMG, P&G, Sykes, Teletech
Spanish
English
infrastructure. During the first half of the millennium – a 10%
increase in annual spending for infrastructure was recorded.22 As
a summary, the following factors facilitated the development of
the outsourcing in Costa Rica:
• Establishment of Intel in Costa Rica initially as a manufacturing
destination which led to the growth of what is now known as the
electronics cluster in the country.
• Strong government support, particularly in the efforts of CINDE.
This has supported outsourcing in the region and promoted the
country in the global outsourcing market.
• Costa Rica is becoming a nearshore destination to the US and an
alternative to Mexico for Contact Support services.
Tholons believes the primary factor for its outsourcing industry
which Costa Rica should monitor is its small labor pool which is
limiting what it can offer to lower-end BPO services. With these
BPO services (back-office, Contact Support and shared services)
being in high demand in the world market, Costa Rica must look
at addressing its labor pool concerns to better capitalize on
market opportunity.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
San José
20
4
7
6
7
8
7
Source: Multilateral Investment Guarantee Agency, World Bank Group 2006
Page 38
COSTA RICA
Hungary
Hungary’s GDP fell to 2.5% by the end of 2008 while inflation rate
peaked at 7.8% early in the year before declining as 2008 came
to a close. The economic downtrend of the country is seen as an
effect of the global downturn which was aggravated by the easing
demand for basic commodities.
On a positive note, Hungary has made progress in stimulating
its economy - curtailing its foreign trade deficit and managing
inflation. The government adopted austerity measures mandated
by the IMF and this has reduced the budget deficit from over
9% of GDP in 2006 to 3.3% in 2008. Though unemployment
has persisted above the 7% range, the country continues to
make inroads across the macroeconomic front with 65% of its
workforce now being employed in the services industry.
The inherent advantages of Hungary in the outsourcing arena
include:
• Excellent risk profile
• Lower wages compared to Western Europe
HUNGARY
Cities in Study
Budapest
Population (2008)
9.91 million
(2008)
67,000 - 80,000
Average Entry Level Salary in
US$ per Month (BPO)
US$1,000 - 1,100
US$ per Month (ITO)
US$1,300 - 1,400
Real Estate Rental Cost 2008
(US$ per sq.ft)
US$3-5
Accenture,Capgemini, Convergys, Deloitte, GE, HP, IBM, Intel, EDS, Microsoft,
Oracle, SAP, Sun Microsystems, Sykes,
TCS, Teleperformance
Hungarian
English
• Linguistic and cultural compatibility to Western Europe
• Favorable tax incentives/breaks on IT imports
• Government support of IT/ITES industries
Hungary also projects a few concerns which act as hindrances
to the country’s outsourcing industry:
• High Telecommunication cost (as an effect of limited market
competition)
• Limited talent pool
Major outsourcing players such as IBM, Accenture, Satyam
Computers, Tata, Oracle, EDS, Capgemini, General Electric, HP,
Genpact and Avaya are present in the country and industry
stakeholders will need to leverage on the presence of these
providers to further develop the country’s outsourcing industry
and improve service delivery maturity.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Budapest
22
6
7
5
9
6
7
Page 39
United Kingdom
As the onshore model is
more commonly subscribed
to in the UK, the dynamics
of the nation are vastly
different from traditional
offshore destinations. Price
sensitivity is much lower
when choosing an onsite
destination since other
considerations such as
compatibility, data security,
and complexity of processes
often takes precedence over
cost.
Onshoring in the UK has
also emerged as a viable
outsourcing model, capable
UNITED KINGDOM
Cities in Study
Belfast, Glasgow, Leeds (Yorkshire &
Humber)
Population (2008)
60.94 million
(2008)
650,000 - 655,000
US$ per Month (BPO)
US$2,000 - 2,500
US$ per Month (ITO)
US$2,800 - 3,000
(US$ per sq.ft)
US$2-4
IBM, Accenture, HP-EDS, CSC, Fujitsu,
Intel, Oracle, SAP, HP, KPMG, Deloitte ,
Capgemini, Sun Microsystems, Teletech,
Convergys, Teleperformance, TCS,
Infosys, ACS, Telus
English
Welsh, Scottish
Page 40
of delivering optimal results if managed properly. Furthermore
and when complemented with multisourcing strategies, even
higher cost destinations such as the UK have emerged to become
profitable service delivery locations. Destinations such as Belfast,
Glasgow City and Leeds which are considerably less expensive
compared to the other Tier I cities in England for example, have
become hot spots for outsourcing.
Onshoring has been subdued by nearshoring/offshoring because
of the pressure on cost and talent pool. However, with offshoring
difficulties now becoming more evident and talent availability
dwindling in many offshore destinations, onshoring is tipped
to gain better momentum in the long term, especially as cost
advantage declines in offshore locations.
The UK needs to focus on the following areas to improve its
stature in the global outsourcing market:
• Education. Interest in taking up technical or IT-related
education and training need to be improved to increase the
number of IT related (and outsourcing capable) graduates.
• Cost. Cost benefits remain the major reason for adapting the
offshore model. The UK must be able to manage and mitigate
the effects prevailing over labor costs to provide a more
competitive outsourcing environment. (i.e. onshoring within
the UK must be made a competitive alternative to offshoring to
lower cost destinations)
• Image. The younger population in the country must view the
outsourcing industry as a viable career path. This perception
needs to be improved considerably as outsourcing is generally
perceived as a temporary career stop.
• Government Support. The UK government and related
associations need to continue to support the industry
and improve the image of the country as a global outsourcing
destination.
Tholons views the UK as having the potential to become one of
the favored nearshore destinations given the proper conditions.
The nation’s already robust business environment and talented
labor pool are just a two of the characteristics which provide the
UK with a competitive advantage in the region.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Belfast
25
4
5
4
9
8
8
Glasgow City
42
4
3
3
9
9
8
Malaysia
Revenue for Malaysia’s outsourcing industry grew by
18% and is expected to reach US$1.1 billion this year,23
contributing barely 1% of the country’s GDP. The growth
of Malaysia’s outsourcing industry remains to be relatively
lower compared to other countries in the region, specifically
the Philippines. With the maturation of outsourcing in
nearby countries, especially with the growing demand for
voice-related services which require larger pools of Englishproficient agents – Malaysia’s growth seems to be stagnant
as its outsourcing industry remains restricted by high labor
costs and its limited labor pool.
Given this situation, Outsourcing Malaysia – the umbrella
organization of outsourcing providers in the country – notes
that the Malaysian BPO industry is not positioning itself to
compete with low-end providers in the global outsourcing
market. Rather, it positions itself to be at par with Singapore
MALAYSIA
Cities in Study
Kuala Lumpur
Population (2008)
25.27 million
(2008)
160,000 - 165,000
US$600 - 700
US$1,000 - 1,100
US$4-5
Sample List of Major Service IBM, Accenture, HP-EDS, CSC, Fujitsu,
Intel, Oracle, SAP, HP, KPMG, Deloitte,
Sun Microsystems, Teletech, Convergys,
TCS, ACS
23
Bahasa Malaysia
English, Chinese
(and to an extent Vietnam) and compete with other destinations
providing high-end, non-voice processes and supported by a
skilled labor pool (albeit small) and adequate infrastructure in
the country. Malaysia is currently known to provide high-end
services in the BFSI as well as energy sectors. These two sectors
are seen as Malaysia’s niche verticals in the outsourcing space.
According to Outsourcing Malaysia, a number of Malaysian
firms are currently providing outsourced services for these
industries and on a global scope. Beyond catering to the BFSI and
energy sectors, outsourced services dealing with supply chain
management, logistics and human resource management are
likewise emerging in the country.
Aside from relatively higher cost of doing business in Malaysia
compared to other countries in the region, Tholons notes that
the country should look into developing delivery capacities in Tier
II cities as this will allow Malaysia to better fulfill global market
demand. Without the development of Tier II cities, and as Kuala
Lumpur becomes saturated, investors will continue to look at
alternatives in emerging, lower cost destinations such as Vietnam
and the Philippines for the provision of high-value ITO and KPO
services.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Kuala Lumpur
27
6
7
5
8
8
5
Association of Computer and Multimedia of Malaysia (Pikom)
Page 41
Ghana
Ghana’s economy has grown considerably since the currency
revaluation in 2007, wherein it recorded a real GDP growth rate
of 7.3% in 2008, up from 5.3% the previous year. With the aim
of nurturing its developing economy, the government has been
aggressive in addressing infrastructural concerns such as the
provision of adequate utilities and transportation networks.
Likewise, measures have been taken to improve ICT requirements
in the country, and investments have been made to acquire
international fiber nodes and to deploy local fiber networks.
The Ghana Investment Promotion Center (GIPC) has been
zealously working to make the country, and particularly the city
of Accra, a more attractive investment destination. The direct
support provided is shown in the ‘Free Zones Status’ given
to international companies locating in the country,
where
incentives range from ten-year tax holidays and compliments,
assistance measures such as exemption of customs duties and
favorable tax-related incentives. The local government also
markets Ghana as proximate destination to Europe, with Accra’s
international airport (considered a hub in Western Africa) being
GHANA
Cities in Study
Accra
Population (2008)
23.38 million
(2008)
9,000 - 12,000
US$350 - 450
US$500 - 600
US$.5-1.5
Sample List of Major Service ACS, Novel Solutions, eServices
Asante
Ewe, English, French, Fante
Page 42
a mere six hour flight from
the UK.
Ghana and in particular the
city of Accra is considered
as commercial hub for
many parts of West Africa.
This advantage in location
has the potential to make
the country the primary
outsourcing destination in
the region. The country is
focused on providing lowend back office processes
such as data encoding
and processing, American
service providers have
experienced
positive
results
deploying
in
the country. ACS from the US for example, has over 2,000
employees in Accra for its data processing services, while 3G
(Contact Support) is expected to scale to 2,400 employees in
the next few years. Unfortunately, the country has struggled to
enhance its reputation as a more prominent offshore outsourcing
destination. Economic factors such as a high inflation rate of
9.6% and unemployment rate of 11.0% - have become points of
concerns for many prospective investors.
Further, one of Ghana’s disadvantages come on the Business
Catalyst parameter, as there are a limited number of IT and
large-sized business establishments found in country. The big
names in the services globalization space have likewise alluded
to locating in the area, which impacts negatively to the country’s
image as a global delivery center. Though government has done
a commendable job in promoting the country, Tholons views
that certain criteria will need significant improvement for it to
rise as an emerging destination. Specifically, considerations
which pertain to Quality of Life and fundamental concerns such
as Infrastructure, Cost and improving capacity of the labor pool
must be addressed.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Accra
32
5
3
8
7
4
6
Romania
Romania’s economy continued to grow in 2008 despite slowing
domestic consumption and accelerating import growth in the
country. With real GDP rising by 7.1% YoY in 2008, growth was
considered moderate and when compared to the previous year.
The primary challenge faced by the economy was the increase
in its inflation rate which continued to accelerate in the last
quarter of 2007 and climbed in 2008, reaching 7.8% by year end.
As such, the reversal of exchange rate trends in the second half
of 2007 and early 2008, which ushered in a strong depreciation
of the Romanian Leu, have somewhat cushioned the effects of
rising inflation and wages. In terms of FDI, Romania accumulated
healthy inflow of US$11.4 billion in 2006 and US$9.0 billion in
2007.
Romania, which joined the Union early in 2007, has continued
to improve economically, buoyed by increasing trade from the
EU market. Romania’s macroeconomic gains have only recently
started to spur the creation of a middle class and address
widespread poverty, though corruption and bureaucracy continue
to handicap its business environment. Inflation rose in 2007 for
ROMANIA
Cities in Study
Bucharest
Population (2008)
22.25 million
(2008)
200,00 - 210,000
US$ per Month (BPO)
US$650 - 750
US$ per Month (ITO)
US$1,100 - 1,200
(US$ per sq.ft)
US$3-4
IBM, Accenture, Fujitsu, Oracle, SAP,
HP, KPMG, Deloitte, Capgemini, Sun
Microsystems, Teleperformance
Romanian
Hungarian, Roman (Gypsy), Englishj
the first time in
eight
years,
driven in part by
the depreciation
of the currency,
rising energycosts,
a
nation-wide
drought affecting
food prices, and a
relaxation of fiscal
discipline. Romania
has some unique
selling propositions with respect to outsourcing:
• Low cost (one of Eastern Europe’s lowest)
• Geographical, cultural and lingual proximity to Western
Europe
• Untapped and talented labor pool
However, Romania has a few inherent problems and challenges,
the most pressing of which are:
• Lack of government policies supporting the outsourcing sector
• Inadequate infrastructure (especially cities outside Bucharest)
The country is home to outsourcing delivery centers from names
such as Oracle, IBM, Siemens, WNS Global Services, Wipro,
Genpact, HP and Alcatel. The country and in particular the
capital city of Bucharest, is a Center of Excellence for software
engineering catering to diverse IT and Telco verticals. Potential
for outsourcing in the country has also been identified for highend KPO processes such as Business Analytics, and ITO processes
such as Product Development, Testing and R&D.
With a favorable Risk Profile and adequate Scale & Quality of
Workforce criteria - one of the primary concerns remains to be
the government’s implementation of support policies needed to
improve the industry landscape. Tholons believes that with its
cost and nearshore advantages, the country has the potential
to escalate its position as a preferred outsourcing destination.
Romania’s stature has shown marked improvement, moving in
the Tholons Global Top 50 - rising to 34th spot in 2009 from 38
in 2008.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Bucharest
34
6
7
5
9
8
8
Page 43
Slovakia
In 2007 and 2008, real GDP growth rate in Slovakia was at 10%
and 6.4% respectively - one of the highest GDP growth rates for
two consecutive years in the Eastern European region. Growth
was solid throughout the last 2 years, but exceptionally high in
the fourth quarter of 2007, when economic activity expanded
by 14.3% YoY. The contribution of net exports to GDP improved
largely as a result of lower imports and despite some slowing
of exports. On the production side, the economy was driven
by movement in the industrial sector. This can be traced to the
recent large-scale buildup of (FDI-derived) production capacities
in export-oriented industries that have fueled export growth (i.e.
automobiles, electronics, and information technology).
Slovakia has managed the difficult transition from a closed
economy to a modern market economy. The government
has made excellent progress in the last five years in terms of
stabilizing the economy and legislating needed reforms. Foreign
investments have also increased due to the implementation
of business friendly policies addressing the liberalization of
labor and provision of favorable business tax rates. Slovakia’s
economic growth in the last five years has exceeded expectations
despite a general European slowdown. Unemployment, which is
a continuing concern, was at 18% in 2003-2004 and dropped to
7.7% by 2008.
Page 44
SLOVAKIA
Cities in Study
Bratislava
Population (2008)
5.46 million
(2008)
40,000 - 50,000
US$ per Month (BPO)
US$650 - 750
US$ per Month (ITO)
US$1,000 - 1,100
(US$ per sq.ft)
US$2-4
IBM, Accenture, CSC, Fujitsu, Oracle,
SAP, HP, KPMG, Deloitte, Capgemini,
Sun Microsystems, Sykes, Teleperformance
Slovak
Hungarian, Roma, English
Some of the advantages of Slovakia as an outsourcing destination
include:
• One of the more progressive economies in the region
• Cost advantage compared to other destinations in the region
• Improving Telco infrastructure
• Strong government and institutional support for outsourcing
• Low inflation rate of 4.6 % (one of the lowest in the region)
With delivery centers from companies such as HP, T-Systems,
LogicaCMG, Accenture, SAP, Siemens and Alcatel to name a few,
Slovakia is making rapid progress in the services globalization
arena. However, some of the challenges the country faces are:
• Rising cost of doing business and inflating salaries
• IP laws require better policy implementation and enforcement
• Labor migrations becoming an issue (migration to higher
paying Western European nations)
Tholons predicts locations in Slovakia to continue to emerge,
though steps need to be taken by government and trade bodies
in order to retain talent in the country and more effectively
manage business costs.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Bratislava
35
4
4
5
8
6
7
Singapore
Singapore has remained one of the top investment destinations
in Southeast Asia - maintaining steady economic growth from
2003 to 2007 – and backed recently by exceptional rates of FDI
inflow in 2006 and 2007 (amounting to US$24.2 and US$36.9
billion respectively). Though Singapore enjoyed economic gains
during the said years, the country has struggled to maintain
economic resiliency since it is one of the countries in the region
that was severely affected by the global recession. According to
Singapore’s Ministry of Trade and Industry, the city-state’s GDP
growth rate of 7.7% in 2007 declined to 1.5% GDP growth rate in
2008 and is expected to hover around 1% to 2% by end of 2009.
Singapore takes a distinctive path in providing outsourced
services. The city-state does not aim to be a direct competitor
to its neighbor countries who provide bulk, low-cost services. In
contrast, Singapore positions itself to be globally competitive in
the high-value outsourcing arena – which place nearshore service
providers as their main competitors. US companies remain as the
top buyer of outsourced services looking at cost-cutting measures
through offshore as well as nearshore outsourced services. Since
Singapore may not necessarily compete in terms of cost, as would
be the proposition of nations providing Contact Support and back-
SINGAPORE
Cities in Study
Singapore
Population (2008)
4.61 million
(2008)
10,000 - 15,000
US$ per Month (BPO)
US$1,600 - 1,700
US$ per Month (ITO)
US$2,200 - 2,500
(US$ per sq.ft)
US$7-9
IBM, Accenture, HP-EDS, CSC, Fujitsu,
Intel, Oracle, SAP, HP, KPMG, Deloitte,
Capgemini, Sun Microsystems, Convergys, Teleperformance, TCS, Telus
English
Mandarin
office services,
the city-state
has
elected
to
provide
higher-value
processes such
as Engineering
and
FAO
services
or
those
services which
lower
cost
destinations may not have the capacities to provide. One of the
primary reasons for the emergence of these services – despite
relatively higher processing costs - is the fact that Singapore
is already headquarters to a number of multinationals. With
regional offices already in place, multinationals opting to procure
services through Singapore can take advantage of its highly skilled
labor pool instead of outsourcing these services to onshore or
nearshore locations in their parent countries.
Though Singapore may not compete in terms of cost or scale of
the workforce, and when compared to other outsourcing hubs
like India and the Philippines, the city-state still emerged as a
destination of choice particularly through its outstanding business
environment, world class infrastructure and stable socio-political
climate – all of which are comparable if not at par with developed
nearshore destinations found in North America and Europe.
Singapore possesses one of the more advanced Telco and
transportation infrastructures in the world – serving as a major
selling point and an underlying factor on the decision of global
companies in choosing Singapore as a base for their regional
offices. As of 2008, more than 7,000 multinational corporations
were located in Singapore, 60% of which have made the country
their regional headquarters. Thus, Singapore registers one of the
highest scores in the Business Catalyst criteria for the region.
On the other hand, the attribute of having a high percentage
of multinationals located in the city-state is seen as one of the
main reasons behind the economy’s struggle during the global
recession since it is heavily dependent on these companies, who
themselves have been adversely affected by slowing market
conditions.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Singapore
36
5
8
3
9
9
9
Page 45
Bulgaria
Bulgaria entered the EU in early 2007 and has experienced strong
growth since a major economic downturn in 1996. Labor market
conditions tightened in 2008 with labor shortages becoming
evident in various segments of the economy (i.e. 20% YoY wage
increase and 12% annual inflation). Overall, the number of the
employed increased by some 3% on average, while the total
unemployment rate fell below 6.3% in 2008, the lowest level
since the beginning of the transition process. Bulgaria’s external
imbalances continued to widen in 2008 and the combined current
and capital account deficit exceeded 25% of GDP last year, mainly
on the back of a widening goods and services deficit and large
increase in private capital inflow.
The outsourcing industry in the country is at its nascent stage
and is home to a few MNC’s such as SAP performing R&D and HP
with its regional contact center. SAP is also utilizing Bulgaria’s
technical talent for software development, while Siemens is
another firm with a sizable delivery center in the country. The
industry is centered in the city of Sofia which is the capital
and economic epicenter of Bulgaria. The city is evolving into a
prominent offshore outsourcing destination, and especially as
the country’s macroeconomic conditions have improved.
Due to the nearshore advantage and lower cost compared to
regional competitors, the country has the potential to become
a premier outsourcing destination. Bulgaria’s competitive
advantage versus nearby destinations can be found in its stronger
Page 46
BULGARIA
Cities in Study
Sofia
Population (2008)
7.26 million
(2008)
40,000 - 50,000
US$ per Month (BPO)
US$650 - 750
US$ per Month (ITO)
US$850 - 950
(US$ per sq.ft)
US$2-3
IBM, Fujitsu, SAP, HP, KPMG, Deloitte,
Sun Microsystems
Bulgarian
Turkish, Roma, English
competencies in Software Development, Engineering and other
high-value ITO and KPO processes. Though the country has a
limited but talented workforce, it leverages on its multilingual
capabilities and proximity to European clients.
Bulgaria has the following attributes which make it an appealing
outsourcing destination:
• Presence of multinationals in the country
• Nearshore advantage with lower cost than Western European
client locations
• Progressive economic climate
• Multilingual capabilities (more than 20% of Bulgarians speak a
foreign language)
The basic challenges for Bulgaria in the outsourcing space are:
• Low recognition of Bulgaria as an outsourcing destination
• Infrastructure needs to improve across the country
• Business environment is hampered due to corruption and high
risk profile
Bulgaria has averaged over 6% GDP growth since 2004, with FDI
amounting to US$5.2 billion in 2006 and increasing to US$6.3
billion in 2007. However, the challenges of corruption in the
public administration, a weak judiciary, and the presence of
organized crime continue to dampen its business environment.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Sofia
40
5
6
5
8
6
8
Morocco
Morocco’s GDP rose by 5.3% in 2008 after recovering from
a regional drought that had severely affected the country’s
agricultural economy in 2007. To help boost the sluggish
performance of the country, the Moroccan government has
implemented the Plan Emergence 2007. This is a comprehensive
industry upgrading initiative to significantly improve the country’s
more traditional agricultural economy as well as explore
opportunities in the IT industry through outsourcing.
Despite the recovery brought about by improved economic
policies and planning, Morocco still suffers a high unemployment
rate that can peak at 20% in urban areas. The huge number of
jobseekers however makes Morocco an attractive destination for
outsourcing companies. The increasing popularity of outsourcing
for Western European countries is benefitting Morocco’s bid for
a portion of the global outsourcing market. The country is both
geographically and culturally close to Europe and its colonial
history has made its labor force fluent in second or third languages.
Its population is fluent in Arabic, with some regions of the
country being proficient in Spanish and/or French. Development
of outsourcing destinations in the country are done according to
regional language proficiency. This strategy not only allows for
better access to cheap labor and fluent speakers but also for more
MOROCCO
24
25
Cities in Study
Casablanca (Dar-el-Beida)
Population (2008)
34.34 million
(2008)
85,000 - 95,000
US$ per Month (BPO)
US$350 - 450
US$ per Month (ITO)
US$500 - 600
(US$ per sq.ft)
US$1.5-2.5
IBM, Fujitsu, Oracle, SAP, HP, Deloitte,
Capgemini
Moroccan Arabic
Arabic, French, English
efficient coordination
between government
promotion
agenciesand potential
investors.
For instance,
Casanearshore24
in
central Morocco
is
becoming
the
destination for French
speaking
market.
On the other hand,
the
Tangiershore25
outsourcing zone in
the north is being groomed to house Spanish businesses in the
hopes of taking a portion of the services being delivered from
Latin Americas.
With regards to infrastructure, Morocco has been pouring
resources to the development of various IT parks and outsourcing
zones. Casanearshore is the first to be launched as an IT park
specifically developed for outsourcing. This park is expected
to offer 250,000 square meters of office space –suited for BPO
and ITO operations. The government is optimistic that the
infrastructure developments and the introduction of various
industry players such as Accenture, TCS and Capgemini will
eventually aid the expansion of Morocco’s offerings from BPO
and ITO functions to more sophisticated KPO services.
Other fiscal incentives are also being offered by the government
including corporate tax exemption for the first five years of
operation. The government has also simplified the bureaucratic
process for setting up business in Morocco in the hopes of
enticing more multinationals to invest in the country.
The real challenge for Morocco is in keeping its advantage not
only in cost but also in quality. Proficiency in French and Spanish,
albeit indispensable, is not enough to secure a healthy position
of growth in the global market. Quality of labor as well as the
ability to move from voice-based services to more sophisticated
outsourced processes remains to be an imperative for Morocco’s
growing outsourcing industry.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Casablanca
(Dar-el-Beida)
44
5
5
7
6
4
8
Casanearshore is a dedicated IT park in Morocco for the outsourcing industry
Tangiershore is a dedicated IT park in Morocco for the outsourcing industry
Page 47
Estonia
Estonia has developed into a dynamic, modern economy which
recorded real GDP growth of 8.3% from 2000 to 2007. A balanced
budget, almost non-existent public debt, flat-rate income tax,
free trade conditions, fully convertible currency with a strong peg
to the Euro, competitive commercial banking sector, hospitable
environment for foreign investment, and an innovative ITES
sector - are all hallmarks of Estonia’s progressive market
ecosystem. The country also has strong trade ties countries
such as Finland, Sweden and Germany. Though this is the case,
Estonia’s economy faced one of the country’s biggest economic
challenges as it posted a negative rate for 2008 at -3.6%. The last
time the country recorded a negative growth rate was in 1999
ESTONIA
Cities in Study
Tallinn
Population (2008)
1.31 million
(2008)
10,000 - 15,000
US$ per Month (BPO)
US$650 - 750
US$ per Month (ITO)
US$900 - 1,000
(US$ per sq.ft)
US$2-3
IBM, Fujitsu, Oracle, SAP, HP, KPMG,
Deloitte, Sun Microsystems
Estonian
Russian, English
segment (including eGovernment) which gives Estonia claim to
being one of Europe’s most ‘wired’ nations.
The basic strengths of Estonia offers in the outsourcing space are:
• Stable, progressive economy
• Nearshore advantage with multilingual capabilities
• Good infrastructure and quality of life
at -0.3%. The sharp decrease is attributed to the investment
and consumption slump following the real estate market and
the overall global economic slowdown particularly in partner
countries that Estonia is in constant trade with.
Estonia’s per capita income of US$21,100 is one of the highest
in the region, which collectively average US$16,000. A 2004 EU
entrant, Estonia is also an economy that benefits from strong
electronics and Telco sectors and firm trade ties with Finland,
Sweden, and Germany. The current government has pursued
relatively sound fiscal policies, resulting in a balanced budget
and low public debt. The Estonian services sector now employs
over 60% of its total workforce and is supported by a strong IT
Page 48
While the challenges the country faces are:
• Limited labor pool (needs to increase number of IT/technical graduates)
• Better fiscal policies to improve macroeconomics
• Better support for outsourcing segment by government and
trade bodies
The country is developing at a steady pace with US$1.7 billion in
FDI inflows in 2006 and US$2.1 billion in 2007. This is noteworthy
when considering the country has a population of just over
one million people. But for Estonia to attract further interest
to its outsourcing industry, government and organizations
like the Estonian Association of Information Technology and
Telecommunications will have to focus on providing only a limited
number of high-value outsourced services which rely more on
technical processes.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Tallinn
46
4
5
6
7
6
8
Uruguay
After recovering from the 2002 economic crisis, Uruguay
experienced robust economic activity from 2004 to 2008
exemplified in the country’s GDP CAGR of 8.0% during the span,
with the last year reaching 8.9%. This is attributed to its strategic
location in the region, allowing it to have strong ties with
Argentina and Brazil, two of the region’s most active economies.
Further, the country posted modest FDI inflow of US$1.4 billion in
2006 and US$900 million in 2007 - a positive sign for the economy
and considering Uruguay is often “overshadowed” by its South
American neighbors in terms of growth potential.
Uruguay is considered as a nearshore outsourcing hub with its
strategic geographical location to key international client markets
URUGUAY
Cities in Study
Montevideo
Population (2008)
3.48 million
(2008)
8,000 - 10,000
US$ per Month (BPO)
US$500 - 600
US$ per Month (ITO)
US$1,000 - 1,100
(US$ per sq.ft)
US$1.5-3
Intel, Oracle, SAP, HP, Deloitte, Siemens,
TCS
Spanish
in the US and Europe as well as local markets in South American.
Uruguay offers the following advantages that are fundamental
for the growth of the local outsourcing industry:
• Strong government support particularly in the IT sector with
incentives given from the national and regional levels
• Bilateral investment treaties with 29 countries including several
client nations such as the US, UK, Germany, Canada, Spain and
potential outsourcing country partners in China and Mexico
• Considered as the safest destinations in the region by the
World Economic Forum which strengthens its attractiveness as
an investment site
Some of the country’s main disadvantages and challenges in the
outsourcing industry are:
• Low scalability of employable labor pool with a population of
just about 3.3 million
• Has a negative net migration rate which shows potential labor
pool moving out of the country
• Strengthening currency has the potential to offset cost
advantages for service providers
Uruguay needs dedicated improvement particularly towards its
Business Catalyst criteria in order to build interest among MNCs
to locate in the country. With 12 functional free-trade zones
in the country, it provides ample infrastructure required for
client operations. MNC’s already located in the country include
Intel, Oracle, SAP, HP, Siemens and TCS. Aside from this, there
must be a conscious effort by the government to push different
sectors, more importantly the academe, in developing potential
labor pool for niche industries the country can provide for the
outsourcing industry. Current outsourcing services provided by
the country are multilingual Contact Support services and lowend Back Office processes serving the healthcare, financial and
technology sectors.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Montevideo
47
2
3
5
6
5
8
Page 49
Slovenia
Slovenia has been referred to as a model of
economic success and stability for the region,
with the highest per capita GDP in Central
Europe at US$27,200. Slovenia has excellent
infrastructure, a well-educated work force, and
strategically located the Balkans and Western
Europe. Structural reforms to improve the
business environment have allowed greater
foreign participation in Slovenia’s economy and
have helped to lower unemployment. Real GDP
growth in Slovenia reached 3.5% in 2008.
In December 2007, Slovenia was also invited to
begin the accession process for joining the OECD.
Despite its economic success, FDI figures in
Slovenia have lagged behind the region average,
registering only US$600 million in investments
for 2007.
The factors that make Slovenia an attractive outsourcing
destination include:
• Progressive and rapidly developing economy
• Untapped labor pool
• Nearshore advantage (lingual, cultural and location)
• High quality of life and low risk profile
SLOVENIA
Cities in Study
Ljubljana
Population (2008)
2.00 million
(2008)
15,000 - 20,000
US$ per Month (BPO)
US$550 - 650
US$ per Month (ITO)
US$900 - 1,000
(US$ per sq.ft)
US$1-2
IBM, Fujitsu, Oracle, SAP, HP, KPMG,
Deloitte, Sun Microsystems
Slovenian
Serbo-Croatian, Italian, English
Page 50
The challenges that Slovenia faces include:
• Limited workforce
• Absence large global players in the country
• High taxes and lack of incentives for outsourcing industry
• Rising cost of doing business and wages
Government and trade bodies need to better guide Slovenia and
improve regulations and tax policies for the outsourcing industry
to flourish. Further, promoting technical education in the country
can improve on the issue of limited workforce. Tholons foresees
the destination to take bigger steps in the years ahead in the
services globalization space, however due to the small scale of
the talent pool (which takes much longer to improve), Slovenia
has not yet completely emerged as a formidable outsourcing
destination.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Ljubljana
49
2
5
7
7
6
6
Ukraine
Apart from Russia, the Ukraine is the only other country in the
list which is not currently a member of the European Union. Like
the Russian common space with the EU, the Ukraine and EU
announced that a Stabilization and Association Agreement was to
be signed between the two regions in September of 2008. This set
of agreements is expected to further bolster trade between the
EU and improve Ukraine’s position in the services globalization
arena.
The considerations for Ukraine’s offering to the outsourcing
segment are the following:
• Availability of mature R&D centers
• Progressive and developing economy
Some concerns and challenges the country’s industry faces
include:
• Business environment (lingering problems with corruption,
legislation, law and order)
• Improvements in infrastructure are required
• Improvements in scale and quality of workforce
More recently, the IMF has encouraged the Ukraine to quicken
the pace and scope of economic reforms. As such, the Ukrainian
Government has eliminated many tax and customs privileges.
This has helped to somewhat curb the ill-effects of the country’s
still sizeable underground economy and signifies the country’s
dedication towards membership into the Union. The Ukraine’s
move towards a more transparent and liberal economy has
UKRAINE
Cities in Study
Kiev
Population (2008)
45.99 million
(2008)
555,000 - 565,000
US$ per Month (BPO)
US$600 - 700
US$ per Month (ITO)
US$950 - 1,100
(US$ per sq.ft)
US$7-8
IBM, Fujitsu, Intel, Oracle, SAP, HP,
KPMG, Deloitte, Sun Microsystems,
Teleperformance
Ukrainian
Russian, English
also increased macroeconomic stability. However, further
improvements are needed to curtail corruption, develop capital
markets, and improve the country’s legislative framework.
The outsourcing industry of Ukraine has also developed
particularly with the emergence of Kiev as a destination of choice
for MNCs. Global organizations such as Microsoft, Luxoft, EPAM
Systems and KPMG are already reaping dividends out of their
delivery centers in the country - utilizing a rich talent pool of
technical professionals performing relatively high-end, technical
processes such as software development and R&D.
Ukraine and in particular the city of Kiev is an important
industrial, scientific, educational and cultural center in Eastern
Europe. It is home to many high-tech industries and higher
education institutions. Engineering-based industries flourish in
the country and support a diverse range of verticals (i.e. aircraft,
chemical to fertilizer industries). The country also has adequate
transportation and Telco infrastructures in its favor. In terms of
improvement of the country’s outsourcing ecosystem, it needs
to focus on its Business Catalyst parameter to generate more
interest in its outsourcing industry and additional economic and
legal reforms need to be implemented to bolster its image as a
regional delivery center.
City
Rank 2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of
Life
Risk Profile
Kiev
50
6
3
4
7
8
6
Page 51
List of Top Emerging and Emerged Outsourcing Destinations
Region
Country
City
South Asia
South Asia
South Asia
Southeast Asia
Western Europe
South Asia
South Asia
South Asia
Southeast Asia
East Asia
East Asia
Eastern Europe
Southeast Asia
South America
Middle East and Africa
South America
East Asia
Southeast Asia
South America
East Asia
South Asia
Eastern Europe
South Asia
South America
South Asia
South Asia
Central America
South America
Eastern Europe
North America
East Asia
Western Europe
Central America
Southeast Asia
Eastern Europe
South Asia
Eastern Europe
Eastern Europe
East Asia
Eastern Europe
Eastern Europe
Southeast Asia
Central America
Eastern Europe
Central America
Eastern Europe
South America
Western Europe
East Asia
North America
Eastern Europe
South America
Eastern Europe
Eastern Europe
India
India
India
Philippines
Ireland
India
India
India
Philippines
China
China
Poland
Vietnam
Argentina
Egypt
Brazil
China
Vietnam
Brazil
China
India
Czech Republic
India
Chile
Sri Lanka
India
South Africa
Costa Rica
Brazil
Hungary
Canada
China
U.K.
Mexico
Malaysia
Poland
India
Czech Republic
Russia
Ghana
China
Romania
Slovakia
Singapore
Mexico
Russia
Mexico
Bulgaria
Brazil
U.K.
China
Morocco
Canada
Estonia
Uruguay
Egypt
Slovenia
Ukraine
Bangalore
Delhi (NCR)
Mumbai
Manila NCR
Dublin
Chennai
Hyderabad
Pune
Cebu City
Shanghai
Beijing
Kraków
Ho Chi Minh City
Buenos Aires
Cairo
São Paulo
Shenzhen
Hanoi
Curitiba
Dalian (Dairen)
Chandigarh
Prague
Kolkata
Santiago
Colombo
Coimbatore
Johannesburg
San José
Rio de Janeiro
Budapest
Toronto
Guangzhou (Canton)
Belfast
Mexico City
Kuala Lumpur
Warsaw
Jaipur
Brno
St. Petersburg
Accra
Chengdu
Bucharest
Bratislava
Singapore
Monterrey
Moscow
Guadalajara
Sofia
Brasília
Glasgow City
Tianjin
Casablanca
Halifax
Tallinn
Montevideo
Alexandria
Ljubljana
Kiev
EMERGING
EMERGED
Category
Page 52
Rank 2007
Rank 2008
Rank 2009
Top 5
Top 5
Top 5
Top 5
Top 5
1
2
3
4
8
10
16
6
14
11
15
13
12
17
18
9
20
5
19
7
21
25
29
-
28
-
22
24
-
31
26
-
27
32
33
-
41
38
-
44
40
-
39
42
30
-
-
34
45
-
-
47
46
Top 8
Top 8
Top 8
Top 8
Top 8
Top 8
Top 8
Top 8
1
2
3
5
4
9
7
8
10
11
13
16
12
14
6
18
19
17
20
27
26
25
22
23
24
30
33
28
31
29
32
34
37
38
35
36
41
39
44
40
43
42
On Tholons Radar
-
48
46
-
-
50
49
Top 8
Top 8
Top 8
Top 8
Top 8
Top 8
Top 8
Top 8
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
Tholons has now provided and ranked the list of emerging
destinations for three consecutive years - providing value for
industry stakeholders by identifying the relative movement
and value proposition of delivery locations and as the category
segments on the list are viewed differently by the different
players in the industry.
One interesting point noted this year is that while three cities
made it to the emerged list from the emerging last year, in 2009
the impact of the global downturn was definitely visible in the Top
8 Established Destinations list as the number of locations failed
to expand. Also it must be noted that most destinations were in
respectively. Montevideo is considered one of the more stable
business destinations in the region and has demonstrated
considerable potential as a nearshore option to US clients. On
the other hand, Alexandria has become the second destination
in Egypt after Cairo, offering better economic value and abundant
talent supply. Western Europe and the Middle East remain the
primary client regions for Alexandria.
The “On Tholons Radar” list identifies cities with a high
probability of rising into the Emerging List in the near future.
While these cities have the potential and have shown promise,
they have not necessarily been on the selection list of service
Region
Country
City
Eastern Europe
South Asia
Southeast Asia
Western Europe
South Asia
South America
Southeast Asia
South America
Central America
Russia
India
Philippines
Ireland
India
Brazil
Philippines
Argentina
U.S.A.
Jordan
Nizhniy Novgorod
Bhubaneswar
Iloilo City
Cork
Thiruvananthapuram
Recife
Santa Rosa, Laguna
Córdoba
Puerto Rico
Amman
ON THOLONS RADAR
Category
fact significantly affected by the global downturn - resulting in a
downward trend in this year’s list.
The two new locations in the emerging cities list are
Montevideo, Uruguay and Alexandria, Egypt at 47 and 48
Rank 2007
Rank 2008
Rank 2009
-
-
-
-
-
-
-
-
-
-
On Tholons Radar
-
-
On Tholons Radar
-
-
-
-
-
On Tholons Radar
Next 1
Next 2
Next 3
Next 4
Next 5
Next 6
Next 7
Next 8
Next 9
Next 10
providers and clients. Tholons is banking on the potential of these
cities to materialize and propel the locations further. Tianjin,
China which has made it to the 43rd spot in 2009 for example,
was only On Tholons Radar status in 2008.
Page 53
Services by Region: Cities as Clusters
Services globalization went through a turbulent phase this
past year, combating the fear of losing major client markets
to protectionism and ravaged by the debilitating effects of the
global downturn. Moreover, the impact of such movements in
the industry is expected to induce long lasting changes. These
changes are not only in the way the stakeholders in the industry
approach offshoring but also a significant paradigm shift towards
the way emerging destinations are viewed.
Services by Region
As the impetus for the diversification of client markets have
been validated, the significant development from the point
of view of emerging offshore nations has now become that of
convergence. Tholons has observed a paradigm shift in the way
emerging offshore nations are now perceived. The emerging
offshore nations and their cost advantage are no longer the sole
focus for outsourcing providers – instead, the target market
(both local and regional) have become equally strong motivation
to establish in particular locations. For instance, the motivation
of a service provider to locate in São Paulo, Brazil may not just
be rooted in the need to cater to an existing client but also to
tap into the regional Latin American market. Hence, locating in
a specific offshore destination can provide the dual advantage
of expanding one’s global footprint and operations as well as
creating a means of acquisition or entry into a new client market.
This phenomenon has clearly segmented global regions into
clusters which specialize in specific services. These clusters also
have a higher propensity to attract clients in specific geographies,
as opposed to individual or isolated delivery locations. Tholons
identifies these regions and their specialized offerings in the
following sections.
These regions have common drivers and hindrances in terms
of offerings to the services industry. The shared factors for each
of the regions include macroeconomics, risk perception, cultural
affinity, business environment and cost structure - bring the
countries to a similar value proposition. However, the major
differentiator for these countries (even though they belong to the
same region) typically is that of talent pool and employability.
Services by Regions (Service Delivery Capabilities by Client Market)
Region
Service Delivery Capability
Delivery
Client Market
North America
Research & Development, High-end managed services
Onshore
Domestic Market
South America
Multilingual Contact Center, Software Development
Offshore/Nearshore
USA, Western Europe, Domestic Market
Central America
Multilingual Contact Center
Nearshore
Hispanic USA, South America
Southeast Asia
English Contact Center, Software Development, Back-Office (Low-End Processes)
Offshore
USA, Western Europe
South Asia
High-end Software Development, English Contact Center
Offshore
USA, Western Europe, Domestic Market
East Asia
High-end Software Development, Japanese Contact Center
Offshore/Nearshore
Japan, USA, Western Europe
Multilingual Contact Center
Nearshore
UAE, Western Europe
Eastern Europe*
Research & Development, Life Science BPO/KPO, English Contact Center, High-End Niche Services*
Nearshore
Western Europe, USA
Western Europe
Research & Development, High-end managed services,
Infrastructure Management Services
Onshore
Domestic Market
* Eastern Europe is fast becoming a region for niche outsourcing services in the financial, healthcare and entertainment industries with specialized services for the verticals like
financial analytics for financial sector, contact research for healthcare sector and animation/3D game development for the media and entertainment industries.
Page 54
Cities as Clusters
The convergence of offshore nations into regions is viewed by
Tholons as a possibly significant trend in the near future due
to its potential impact on global offshoring delivery models.
Although a region provides a common converged area for the
services globalization industry, there is a clear need to further
understand this convergence on a more granular level.
The growth of successful offshore destinations has normally
meant that the city location has developed in terms of export
revenue, employment, infrastructure and population. Moreover,
an interesting result can also be seen in the wider spread of
city catchment areas.20 The most successful cities historically
have also been those that have been able to grow out of
its geographical boundaries and attract talent from a larger
catchment area. These larger, offshore destinations have thus
evolved into large city clusters which have become increasingly
seamless in terms of talent pool.
Tholons identifies some of the clusters which have started
to surface and also some future possibilities. These clusters are
based on the seamless nature of talent pool in their given region,
and the availability of talent pool in the proposed clusters are
not limited or restricted to individual city limits, administration
and/ or national and international boundaries. The following
are the basic qualitative and analytical factors considered for
20
identifying a cluster:
• Time to Travel
• Means and Ease of Transportation
• Affinity (Economic-Social-Political-Cultural)
• Future convergence due to outsourcing activities/capacities
The Tholons concept of a seamless talent pool will be the focal
point of the identified clusters in the following sections. These
selected city clusters showcase a relatively seamless talent pool
for their respective outsourcing industries - though “absolute
cohesiveness” is never completely achievable. Reaching higher
levels of seamlessness will necessitate improved efficiencies in
the areas of accessibility, speed of travel, and business affinity
within locations (cities) in a cluster. Eventually, when city
locations become more cohesive clusters, Tholons expects the
clusters to further expand and become even more seamless
entities – sharing common labor pools and infrastructure
resources.
Tholons views this as a significant development due to
the fact that services globalization has now reached a level of
maturity where it has the capability to influence the development
of cities – this is a classic case of globalization and its impact
on the offshore landscape. The identified city clusters and a
brief description categorized by regions are provided in the
subsequent sections.
City Catchment Area: The geographical area the city is able to attract talent pool from, the resources travel to and fro their residential location to the city for work instead of migrating permanently to the city
Page 55
Cities as Clusters
South America: Greater São Paulo
The Metropolitan Region of São Paulo, known locally as Região
Metropolitana São Paulo, is the largest conurbation in South
America and also ranks as one of the biggest metropolitan
areas in the world. 2008 estimates show the metropolitan area
population to be around 19.7 million, spread out over a vast land
area of 8,051 square kilometers.
The city of São Paulo maintains its 2008 rankings at 8th place
in the Global Top 50 of 2009. The city benefits from its large
population and skilled labor force, which can be attributed to the
seamless labor flow from suburbs and other surrounding areas
within the Metropolitan Region of São Paulo. The metropolis is
composed of 39 municipalities, the largest being the city of São
Paulo, with supporting municipalities such as Guarulhos, São
Bernardo de Campo, and Santo Andre.
In recent years, the population of São Paulo has experienced
a moderate decline. This, however, does not necessarily translate
to a slowdown in economic activity since population declines in
the city are offset by rising growth rates in cities surrounding São
Paulo – namely, cities which belong to the Metropolitan Region.
While São Paulo had a 0.60% growth rate down from the 1990’s
0.91%, municipalities like Santana de Parnaíba (4.71%), Vargem
Great Native of São Paulo (4.10%), and Itaquaquecetuba, (4.06%)
recorded significantly higher growth rates. It can be inferred that
even in recent years, the Metropolitan Region of São Paulo is
continuously expanding, with possible links to labor migration
and other migratory practices as more and more industries locate
to strategic areas within the metropolis.
Such trends in population growth and migration suggest
a gradual but continuous consolidation of this metropolitan
region. This geographical delineation becomes more definitive as
municipalities are slowly being treated as part of a singular cluster,
sharing the same characteristics, capacities, and resources. This
cluster however, must be supported by a common infrastructure
to ensure smooth flow of labor pool and resources. As an example,
313 km. of metro and rail lines are shared by both public and
freight transport in the area. As a result, more households opt
to commute by car – adding to traffic congestion. The current
transportation scheme is acceptable but public transportation
Page 56
City/Town
Scale Area Index Distance to Time to
Index
Travel
Travel
São Paulo
1.00
1.00
-
Guarulhos
0.12
0.21
17 km 20-30 minutes
São Bernardo de Campo 0.08
0.27
21 km 35-45 minutes
Santo Andre
0.07
0.11
22 km 35-45 minutes
Barueri
0.02
0.04
31 km 35-50 minutes
Francisco Morato
0.01
0.03
55 km 50-70 minutes
can still be improved to remedy existing traffic problems.
Service Capabilities: Greater São Paulo
The development of this region, especially in the services sector,
Cities as Clusters
began in the 1990’s – a crucial time for this area which suffered
from a severe economic depression in the late 1980’s. The region
underwent a process of exploring other economic capabilities
and thus diversified to the services sector from what was once
a heavily-dependent industrial (manufacturing) based economy.
Currently, the tertiary sector accounts for 73% of the Metropolitan
Region’s economy.
This metropolitan region is home to almost 20 million people.
The sheer enormity of scale that this region possesses – not
to mention the competitiveness of the labor force in multiple
languages and IT services – presents remarkable advantages
over other outsourcing destinations. In fact, the metropolitan
region is a preferred location for outsourcing companies such as
Accenture, Convergys, Tata Consultancy Services, Cisco Systems,
Dell, and HP.
Though the region enjoys a high level of diversity in economic
activity, it is best known for the following specializations in the
outsourcing industry:
• Product Development
• Application Development and Maintenance (ADM)
• Testing
• Multilingual Contact Center
South Asia: Delhi NCR
Delhi is the capital territory of India. Arguably the most prominent
city cluster for services globalization with the coming together of five
large surrounding cities. Each city complements the other and makes
the complete value proposition of the NCR highly competitive.
The cities within the cluster do not belong to the same
administrative control, due to the federal structure in India.
While Delhi is the capital state of India, Gurgaon and Faridabad
fall in the state of Haryana, while Ghaziabad and Noida are in
Uttar Pradesh. Regardless of this difference, the economic,
cultural and lingual differences are minimal – key drivers to why
the cluster works well in terms of seamless talent flow. Also it
must be noted that the connectivity of these cities is optimal with
the presence of highways and expressways which reduces travel
time considerably.
The significant improvement that the cluster can look forward
to is the completion of the Delhi Metro project. It has already
succeeded in cutting travel time in Delhi after the completion of
the Phase 1 of the project - the metropolitan area of Delhi is now
connected. Phase 2 will see expansion into Gurgaon and Noida
- this would significantly increase the seamlessness of the large
talent pools available in those cities.
City/Town
Scale Index Area Index Distance to Time to
Travel
Travel
Delhi
1.00
1.00
-
Gurgaon
0.04
0.50
30 km 45-60 minutes
Noida
0.02
0.34
10 km 15-25 minutes
Faridabad
0.01
0.81
35 km 50-70 minutes
Ghaziabad
0.07
1.15
19 km 25-40 minutes
As the real estate costs in Delhi have steadily risen along with
the stress on infrastructure, businesses have continued to look
at nearby cities with lower business cost and equally competitive
business environments. This gave rise to the townships of Noida
and Gurgaon, which came into prominence as Delhi started
expanding due to space and cost constraints. Gurgaon and Noida
have emerged as feasible delivery locations and as incentives by
the Haryana and Uttar Pradesh state governments have resulted
in the creation of SEZs – a welcome scenario for service providers
looking for alternatives beyond the Delhi center.
The table above highlights the proximity and travel within the
Delhi NCR cluster. This is one of the reasons for the seamlessness
between talent pools since people residing in any of these cities
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Cities as Clusters
are easily able to commute from one city to another.
Service Capabilities: Delhi NCR
The region is considered one of the most mature offshore
destinations globally with a proven track record of successful service
delivery. Delhi NCR has become a successful destination due to the
hub and spoke model between the neighboring cities and the capital
metropolitan area. The continued development of infrastructure and
the cosmopolitan culture in the cluster makes it a desirable location
for talent pool from across the country to migrate into.
The NCR of India is home to delivery centers for most of the
large global players in outsourcing. Well placed in the area are
the likes of IBM, Microsoft, Intel, Oracle, Accenture, HP, Amdocs,
Capgemini, SAP, Siemens, Motorola, Dell and Indian players like
Infosys, TCS and Wipro, to name a few. Delhi NCR is a Center of
Excellence for the following types of operations:
• English Contact Support
• Business Analytics
• Finance and Accounting
• Software Development
• Engineering Services
South Asia: Hyderabad-Secunderabad
Hyderabad has become one of the most mature outsourcing
destinations in the world. Hyderabad-Secunderabad is not
merely a city cluster, but considered more of sister/twin cities.
There is no differentiation made by the population between
the two, likewise, both cities have minimal geographical
boundaries.
The nature of these twin cities further substantiates the
concept of city clusters. The cluster has extremely close affinity
across its population and the talent pool travels through cities
seamlessly – making it an ideal cluster in that regard. Rarely is
the talent pool in both the locations considered separately by
companies choosing to locate in the twin city cluster.
Page 58
City/Town
Travel
Travel
Hyderabad
1.00
1.00
-
Secunderabad
0.05
0.30
15 km 30-50 minutes
The public transportation system in the city is adequate
though it can be further optimized. Currently, an ongoing metro
rail is awaiting completion. Road connectivity is facilitated by
National Highway 7, with an adequate number of public buses
and passenger trains further connecting the twin cities. However,
traffic is less than ideal during rush hour, though is expected to be
improved once the new metro rail becomes operational.
Cities as Clusters
Service Capabilities: Hyderabad-Secunderabad
The twin cities emerged in the country’s offshore map after other
Indian cities like Bangalore, Mumbai and Delhi. However the
cluster has shown phenomenal progress with excellent incentives
and infrastructure for providers choosing to locate. Also, the
state of Andhra Pradesh has a large engineering talent pool which
used to migrate to Mumbai, Bangalore, Chennai and other cities
for employment opportunities, but as the cluster developed,
retention of the talent pool (and moreover reverse brain drain)
into the city has enabled it to become a highly competitive and
dynamic business location.
Organizations that choose to locate in an emerging city have
the first mover advantage and the propensity to grow in parallel
with the growth of the city. Hyderabad has been the destination
of choice for large MNCs like Microsoft, HSBC, Dell, Accenture,
IBM, Keane, Oracle, CSC, Google, Deloitte, Honeywell, Motorola,
Convergys and ValueLabs. Indian MNCs like TCS, Wipro, Infosys,
Cognizant Technologies, Genpact, HCL, iGate, etc., have also
contributed to the growth of the city. Hyderabad has also
developed its own home grown MNCs like Mahindra Satyam
(leading 3rd party provider in/from India), Prithvi Information
Solutions (growing IT consulting and engineering services firm),
InfoTech (Leading engineering Services, GIS and IT services firm)
among others, which have facilitated the growth of the city.
The twin city has developed considerable competencies and
delivery capabilities specializing in servicing the healthcare, hitech and telecommunications verticals. It is considered a Center
of Excellence for the following:
• Application Development and Maintenance (ADM)
• Engineering Services
• Software Testing
• English Contact Support
Southeast Asia: Kuala Lumpur-Cyberjaya
Kuala Lumpur is the capital city of Malaysia and the country’s
commercial center. The city is part of an urban agglomeration
known as Klang Valley. This agglomeration is comprised of several
cities, towns and suburbs, including Shah Alam, Petaling Jaya,
Putrajaya and Cyberjaya among others. Together, these areas
comprise the Kuala Lumpur-Cyberjaya cluster. The Klang Valley
is a territory of the State of Selangor. Despite the administrative
distinction between the areas in this cluster, it must be noted
that the Kuala Lumpur-Cyberjaya area effectively functions as an
outsourcing cluster due to the relative ease of flow of labor and
ambiguity between the city and township’s economy, culture and
language.
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Cities as Clusters
City/Town
Travel
Travel
Kuala Lumpur
1.0
1.00
-
Cyberjaya
0.03
0.12
50 km 30-40 minutes
Petaling Jaya
0.36
0.40
11 km
15 minutes
Shah Alam
0.40
1.19
26 km
30 minutes
The table above shows the proximity and travel time from
Kuala Lumpur to the other cities in the cluster:
The cluster has more than six million in population and
attracts skilled labor from Malaysia’s other states as well as
overseas. This substantial labor pool commonly drive to work
or commute using public transport while residing in suburban
areas around the metropolis. Workers either commute via
a comprehensive KTM Commuter (Keretapi Tanah Melayu
or Malaysian Railways Limited), bus and the LRT system, or
drive private vehicles through the region’s excellent express
highways. The LRT and the bus system transport some 400,000
commuters daily.
The Kuala Lumpur-Cyberjaya city cluster benefits from being
part of the Malaysia Multimedia Super Corridor. This initiative
by the Malaysian government aims to establish and promote a
business environment conducive for ICT-enabled enterprises.
The Kuala Lumpur City Center and Cyberjaya are both established
in connection with the MSC initiative, practicing the concept of
industry clustering (similar to the approach of Silicon Valley in
California). In this practice, businesses which are interconnected
by competition or supplier-client relations are put together in one
geographic area. It is believed to be effective in supporting the
growth of similar ICT enabled services by providing the necessary
technological infrastructure, business catalysts, quality talent
pool as well as bolstering competition (a key factor in driving
innovation in knowledge and technology-based businesses).
Cyberjaya for instance is planned to be the technology hub for
shared services and outsourcing. However, as its infrastructure
and business environment became more competitive, other ITenabled services began locating in Cyberjaya. The HSBC, DHL and
Dell disaster recovery and data centers as well as Panasonic’s
R&D center have located in the area. The hub is no longer limited
to shared services and outsourcing businesses. With the presence
diverse ICT companies, and a talent pool possessing a wider array
of IT skills – Tholons sees sustained growth for the cluster’s
Cyberjaya is hub to Malaysia’s premier IT Park, and supported
with excellent infrastructure. Leading outsourcing players
have established operations in Cyberjaya, and now include
IBM Malaysia’s ASEAN Regional Contact Center. This help desk
support center serves IBM clients from over 70 countries. EDS
has done the same, with 1,200 of its employees providing
BPO and ITO services. Shah Alam on the other hand, houses
the recently opened i-City, an IT park that features “plug and
play” ease of operations for businesses. As exhibited by the IT
zones in Shah Alam and Cyberjaya, this city cluster has proven
effective in setting up the necessary infrastructure for IT-related
businesses, enticing other business catalysts such as industrial
Page 60
manufacturing companies to locate their operations in the area.
Petaling Jaya and the other townships in the cluster accounts
for the residential areas, though several smaller providers have
also set up their contact centers in the area. These, along with
established companies in the financial and commercial center of
Kuala Lumpur make up the outsourcing hubs in the Kuala LumpurCyberjaya cluster. With Kuala Lumpur becoming more saturated
and expensive, the surrounding townships and cities have risen
as more cost efficient alternatives. Industry estimates show that
office spaces in Cyberjaya, Shah Alam and Petaling Jaya range
from US$1.5 to US$2.50 per square foot, considerably cheaper
than Kuala Lumpur’s US$3.00 to US$5.00. As viable alternatives
to the traditional commercial centers in Kuala Lumpur, the other
cities in the Kuala Lumpur-Cyberjaya cluster effectively functions
as sub-clusters – supporting the growth and expansion of the
primary or ‘parent cluster.’
The metropolitan design of the Kuala Lumpur-Cyberjaya
cluster is extremely well organized - featuring clusters of IT
parks and business hubs according to industry. This industry
clustering approach has proven to be an advantage in attracting
and sustaining ITES firms into the area. Excellent infrastructure
and ease of operations lure a wide array of ITES and IT businesses
into the city cluster, providing for a thriving and competitive
business environment. Such an ecosystem allows for sustained
growth not only in innovation but also in opportunities for
workers to hone skills needed in IT and outsourced services.
Furthermore, developers of IT parks and real estate have also
found the growing demand for business space a lucrative
venture. This provides the city cluster a certain level of selfsustainability, wherein as other related industries grow, i.e.
real estate, IT parks and ICT firms, the outsourcing industry’s
potential for expansion increases.
Cities as Clusters
Services Capabilities: Kuala Lumpur-Cyberjaya
The Kuala Lumpur-Cyberjaya city cluster
outsourcing firms such as IBM, Wipro,
Convergys, Satyam, Teletech and Fujitsu.
Lumpur’s population speaking English and
is host to leading
EDS, TCS, Infosys,
With 87% of Kuala
50,000 of the labor
force educated overseas every year, the city cluster has the
capacity and capability to support outsourced Contact Support,
Finance and Accounting Services, Logistics as well as Software
Development and Design.
Southeast Asia: Manila NCR
The success of Manila NCR (National Capital Region) as an
outsourcing destination has established the Philippines as
both a practical and economical outsourcing destination. The
National Capital Region or Metro Manila is home to established
destinations such as Makati City, Pasig City and Quezon City. These
cities benefit from the metropolitan’s ease of transportation
and almost seamless flow of labor. The cities are connected by
three intersecting metro railway lines and a main highway that
traverse each commercial district of the metropolitan. The labor
pool is easily mobilized across the NCR through the bus system,
taxis, and other public utility vehicles. While presently heavy
volume of traffic can cause some inconvenience for commuters,
it is expected to be alleviated once other circumferential
highways and additional metro railway stations (currently under
construction) become fully operational.
The Manila NCR cluster has a population of roughly 11 million
people. There are 270 higher education institutions that supply
some 22,000 technical graduates and 75,000 non-technical
graduates. According to the National Statistics Office, an estimated
7.6 million people comprise the NCR’s labor force. Flow of labor
is facilitated by Manila NCR residents’ commuter lifestyle. On
the average, 5.8 million students and workers commute from all
over the region, 4 to 5 times per week, with many coming from
smaller towns in neighboring provinces. Moreover, as a support
for the region’s outsourcing industry, the Philippine government
has provided for extended operation hours of the railway system
to accommodate night-shift industry workers. With this almost
City/Town
Travel
Travel
Makati
1.00
1.00
-
Pasig
1.20
0.30
7.6 km 20-30 minutes
Quezon City
5.20
1.60
Taguig
1.20
0.40
Mandaluyong
0.60
0.20
Manila (Capital City)
3.30
1.41
seamless mobility, service providers are provided a sustainable
and diverse talent pool from across the cities in the cluster.
There is virtually no difference in language and culture among
the cities within this cluster, albeit some cities appear to have better
quality of life standards and supporting infrastructure such as
hospitals and schools. As for the telecommunication infrastructure,
the entire Manila NCR cluster is serviced by the three top providers
of the country – Philippine Long Distance Telephone Company,
Bayan Telecommunications and Globe Innove. The international
airport is also within the cluster, easily accessible both by public and
private transportation. There are daily flights to the US and most
other international destinations. Plenty of leisure and recreation
areas can also be found in Manila NCR and are most often located
in the vicinity of business districts.
Aside from the steady supply and easy flow of labor,
competitive costs of operations have also made this city cluster
an attractive outsourcing location. Office spaces range from
US$5.50 to US$6 per square foot, cheaper than Ho Chi Minh’s
Page 61
Cities as Clusters
US$6 to US$7 per square foot.27
Expansion of office spaces is also expected. In Quezon City
alone, 28 IT parks have been registered with the Philippine
Economic Zone of Authority28 - with the UP Science and Technology
Park as one of the latest additions. HSBC has recently opened its
second global resourcing facility in Quezon City, employing some
2,500 agents. Convergys, which employs an estimated 11,000
contact center agents in the country, opened its seventh contact
center in the Manila NCR cluster, locating in a facility in the UPAyala TechnoHub in Quezon City. This site is expected to employ
an additional 1,000 contact center agents for Convergys.
With Makati and Pasig cities becoming increasingly saturated,
the city of Taguig (a mere five minutes from Makati) has developed
the Global City-Fort Bonifacio as a viable alternative for ITES
businesses. It is considered to have superior infrastructure as well
as better accessibility to other outsourcing destinations such as
Pasig and Mandaluyong compared to other emerging cities in the
country. Global City-Fort Bonifacio has been steadily attracting
service providers. For instance, JP Morgan Chase & Co. maintains
a 1,000-seat facility in Makati City while having recently expanded
its 1,400-seat facility in Global City-Fort Bonifacio. It plans on
setting up another center in Global City-Fort Bonifacio, targeting
an additional 6,000 agents in the country by the end of 2009.
While the government is promoting other Tier II destinations
such as Santa Rosa and Cavite City to further address saturation,
most outsourcing companies continue to choose the Manila
NCR cluster as a primary destination. They remain to be more
confident in the region’s transportation and road connectivity,
Telco infrastructure (which tend to be fewer in locations outside
the city-cluster), local government support, accessibility to
quality schools, hospitals and recreational centers. The growth of
the Manila NCR city cluster therefore is spurred by the saturation
of traditional locations as well as the intent of emerging cities
to make most of their geographical proximity and same labor
pool access to established locations. Tholons expects continuous
improvement of the cluster and the continued expansion by
service providers to smaller, outlying cities.
Arguably, LGU’s within the Manila NCR cluster have sufficient
administrative autonomy, though one cannot deny that local
executives agree in recognizing the potential of the outsourcing
industry. Furthermore, without provincial agendas to adhere to,
these cities are more inclined to follow the national agenda that
emphasizes the importance of ICT and the outsourcing industry’s
role in a city’s economy. This drives cities into maintaining
business environments that are able to keep up and compete
with other cities in the same city-cluster. Further, while each city
tries to secure a portion of the outsourcing industry’s revenue
for itself, as a whole, it productively functions as a city cluster
that does not significantly differ in transportation, connectivity
and infrastructure. Most importantly, the Manila NCR functions
as a cluster for its cities and has an almost uniform access to a
common talent pool.
27
28
Source: Office Space Across the World 2008, Cushman and Wakefield
Government branch which grants and governs fiscal and non-fiscal incentives for IT parks
Page 62
Service Capabilities: Manila NCR
Voice-based BPO services, as evidenced in its large Contact
Support segment - remain to be Manila NCR’s biggest
contributor to the outsourcing industry. Global BPO providers
are well entrenched in the cluster, with prominent names such as
Accenture, Convergys, PeopleSupport, IBM and HSBC all having
operations in multiple centers across Manila NCR. Smaller niche
service industries continue to develop, including transcription,
finance and accounting, animation and software engineering.
In a study co-conducted by the Business Processing Association
Philippines, non-voice services providers reported that they plan
on expanding their workforce and output by an estimated 25%
by the end of 2009. Thomson Reuters has already announced
its plans of setting up a legal research and transcription facility
in Global City-Fort Bonifacio and Fujitsu intends to increase
its presence in the country through its acquisition of Supply
Chain Consulting Pty. Ltd., a firm that provides software and IT
solutions to clients in Southeast Asia and Australia. However, it
was also found from the same study that while the non-voice
service providers are optimistic about the potential increase of
revenues this year, they remain apprehensive about the difficulty
of recruiting qualified applicants and the cost of training new
hires. Nonetheless, with specific initiatives of the government
and partner organizations in providing training programs for
transcription services and scholarship grants for those pursuing
an IT-degrees for example, capabilities for non-voice services can
be expected to improve in a steady and sustainable pace.
Cities as Clusters
Future City Clusters: Disappearing International Boundaries
One of the most important characteristics of services
globalization, which is to have the best suited talent pool for
the right types of processes - has also successfully managed to
bridge geographical boundaries. This is evident from the above
mentioned city clusters. The cities which have been able to
expand their catchment areas have become better suited for
the industry due to a larger talent pool. However, the concept
of city clusters extends beyond international boundaries. Just
like the city borders have been mitigated by the industry due to
the seamlessness of talent pool availability within the cluster.
Tholons predicts that this phenomenon will be exhibited by cities
in different countries as well. It should also be mentioned that
cities converging as a singular cluster have a distinct advantage
over isolated cities since the clusters are better able to expand
service lines and value propositions to clients.
Some of the international outsourcing clusters that Tholons
foresees for the near future are:
Kuala Lumpur-Singapore: As the Kuala Lumpur and Singapore
clusters grow their respective catchment areas and reduce travel
time, this cluster will emerge with a strong value proposition for
outsourcing. Since both Malaysia and Singapore already have
proven capabilities in service delivery, particularly in high-end
value services, the combined talent pool has the possibility to
enhance the growth in the cluster considerably.
Montevideo-Buenos Aires: The cluster potential of Buenos
Aires (with its scale) and Montevideo (with its niche capabilities)
can be viewed in their proximity - separated by a 45 minute boat
ride. A bridge is already being planned which will cut minimize
travel time (by road) to less than an hour. While Uruguay has the
advantage of being a liberal free-trade zone in the region with
the added advantage of an excellent education system, Argentina
continues to improve service delivery maturity. Both countries are
part of MERCOSUR and the language/cultural affinity is excellent.
Tholons believes that this will be the most prominent outsourcing
cluster in South America in the near future.
Eastern European Cities: Tholons believes that there is
a possibility of cluster formation in Eastern Europe due to the
proximity and affinity of similar sized countries in the region. After
the recent expansion of the EU in 1994 and 2007, many emerging
offshore nations became part of the Union. This has opened a
window of opportunity for countries like Hungary, Poland, Czech
Republic, Slovakia, Slovenia, Romania, Estonia and Bulgaria. Cities
from each of these Eastern European countries have been a part
of the Tholons Emerging Outsourcing Destinations list and have
the potential to form outsourcing clusters as they develop service
delivery capabilities.
Tholons predicts Kraków-Brno-Bratislava-Budapest to come
together as the first Eastern European cluster. The distance
between each of these cities is no more than 200 km and travel
time is constantly reduced with better connectivity both by road
and rail.
For this theoretical cluster to develop, one of the cities will
need to be the primary catalyst and attract that sizeable Tier I
client – this would not only create jobs, but would also banner
the proposed cluster’s capacity. However, there will remain
difficulties in identifying definitive outsourcing clusters in the
region as most Eastern European cities are still considered as
emerging destinations and more prone to disruptive ecosystem
variables.
Other potential clusters have also started to appear, LondonParis and Bangalore-Mysore are examples of future clusters which
are waiting for the infrastructure necessary to reduce travel time.
Dubai-Sharjah-Abu Dhabi appears to have formed a cluster, with
people residing in either of these cities travelling to the other for
work, and irrespective of the administrative/political boundaries
separating the cities.
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Cities as Clusters
Conclusion
The sustained growth of offshoring and outsourcing during the
global economic slowdown has proven the maturity and value
proposition of the industry for both client and service delivery
nations. The Tholons Location Assessment Framework has been
critical in observing the shift of these destinations over the years
– identifying increasing competition, developing infrastructure,
changing cost structures, dynamic talent pools and evolving
business environment.
Perception is Reality. The most important vantage point in
viewing offshore destinations is from the perspective of clients.
Reality is sometimes very different from what is perceived
– moreover it is equally difficult to modify perceptions. For
example, the risk profile for Sri Lanka is presently at its lowest
with issues stemming from human rights violation, domestic strife
and political instability. However, the truth is that the war is all
but over and the situation has improved rapidly - but the impact
of the already formulated perception is such that the travel
advisories from US still persists and the overall risk is considered
very high by client nations.
The significance of the client’s perspective towards
an offshore destination and based on the location’s value
propositions and service level maturity, is exemplified by the
Top 10 service delivery countries in the report. The Top 5 and
Next 5 Offshore Nations are hence an integral part of this study,
as it identifies the catalysts which have provided the momentum
for these countries to evolve into successful offshore nations.
Proper identification of the drivers and inhibitors for each
offshore nation is critical to understanding how these factors
mesh together to determine the service delivery capabilities
of a given destination. Given these three factors – catalysts,
accelerators and inhibitors – we see how each Offshore Nation
has its own inherent strengths and weaknesses, and when
weighed, builds a niche proposition to specific client needs.
Moreover, it helps understand what offshore destinations
need to do to transition to an established destination status.
Nevertheless, there is no perfect outsourcing destination per
Page 64
se, but only best-fit locations, appropriate to match the specific
client/service requirements.
Furthermore, the concept of convergence of destinations into
Regions and City Clusters has been introduced and identified by
Tholons for the first time in this report. Tholons believes that for
sustained, widespread growth to occur, destinations will need
to mature and develop beyond geo-political boundaries. Most
established destinations across the world are facing problems of
talent pool saturation and rising real estate cost, while associated
problems like overall rise of operational cost and diminishing
employability of talent pools have tainted the value proposition
for individual (or isolated) cities. The future of these mature or
saturated destinations may in fact rest on the ability of such
cities to form city clusters and expand their talent and resource
catchment areas. Moreover, Tholons sees that the formation of
City Clusters due to services globalization, will eventually reach
beyond international boundaries. It also is important to note
that the formation of clusters significantly enhances the value
proposition of destinations and hence helps their respective
positioning to clients.
Ultimately, Tholons believes that the key to a successful
transition from being an emerging to an established outsourcing
destination lies in the expansion of its catchment area and
improvement of value proposition to clients. Given this awareness,
stakeholders are now battling for position to be the best of breed
in their respective niches whilst expanding. In addition, even as
the growth of the entire outsourcing industry begins to level-off
while entering the ‘post downturn’ phase, it is not enough for a
destination to simply hold ground and maintain existing clients.
This will be especially evident as global competition becomes
more cutthroat. Expansion may have temporarily have leveled off
in the industry, but many offshore destinations, particularly those
in their nascent stages who are showing significant potential –
are already jockeying for position and may well be on next year’s
lists of the Top 5 Offshore Nations or Top 8 Emerged Outsourcing
destinations.
Glossary
vApplication Development & Maintenance (ADM) offerings
include customized application development, enhancements,
infrastructure and applications management, operations
support and maintenance. Cost savings and maximizing ROI are
key factors driving ADM Outsourcing and this service is normally
customized to match the exact requirements of the clients.
vBusiness Analytics is the processes wherein companies gather,
mine, and interpret data in order to make better business
decisions and optimize business processes. This KPO based
process is employed by an organization to optimize decision
making processes through the use of statistical techniques and
analytical tools (i.e. collecting data, assembling and analyzing
it to better promote, enhance or improve their products,
services, marketing, etc.).
vContact Center is a term referring to a company phone center/
customer service center that provides outsourced services
such as help desk, customer support, technical support,
lead generation, emergency response, telephone answering
services, inbound response and outbound telemarketing.
vEngineering Services offerings include, but not limited to
processes which involve or pertain to product & component
development & maintenance: concept, drafting, design
(logical and physical), analysis, testing, prototype and “first
piece” production, embedded software, control systems,
software, integration, plant design, process engineering,
plant automation and maintenance, geospatial and geological
services.
vFinance & Accounting encompasses a broad range of
organizations that deal with the management of capital
resources. Among these organizations are banks, credit
card companies, insurance companies, consumer finance
companies, stock brokerages, investment funds and some
government sponsored enterprises. These organizations
outsource services ranging from low to high value like
accounts payable/receivable, compliance management,
customer service, financial reporting, risk management,
general accounting, procurement, investor relations, payroll,
sourcing and legal, tax management, fund management,
financial analytics, etc. (FAO: Abbreviation for Finance &
Accounting Outsourcing)
vHuman Resources deals with individuals within an organization
and the department and support systems responsible for
personnel sourcing and hiring, applicant tracking, skills
development and tracking and compliance with associated
government regulations. Service Providers provide a range of
HR services, such as the delivery of training and development,
internal and external recruitment, performance management,
health and safety and occupational health.
vInfrastructure Management Services (IMS) refers to remotely
managing information technology (IT) infrastructure such as
workstations (desktops, laptops, notebooks, etc.), servers,
network and storage devices, IT security devices, and related
computer platforms within a company. The major sub-services
included in IMS are Service/Help desk, Proactive monitoring
of server and network devices, Workstation Management,
Server Management, Storage Management, Application
Support, IT security Management, etc.
vLegal Services are activities provided by a lawyer, or other
person(s) under the supervision of a lawyer, to assist
individuals in seeking or obtaining legal help in civil matters
such as housing, divorce, child support, guardianship,
paternity and legal separation. Outsourcing of Legal Services
is a specialized BPO process activity which helps/assists
law firms in outsourcing repetitive/bulk processes. Legal
Outsourcing companies provide services such as document
review, legal research and writing, drafting of pleadings and
briefs and providing patent services.
vLife Science BPO/KPO is derived from the life/health science
vertical and includes services such as contact research, clinical
trials, healthcare management system, drug discovery and
also low value services like transcription.
vMultilingual Contact Centers handle/process calls in multiple
languages depending on customer requirements. Contact
centers utilize communication channels which are either voice
or non-voice, with non-voice contact centers using e-mail,
chat and other technologies to interact with the customers.
vProduct Development is comprised of conceptualizing,
designing, developing and maintaining software products.
It is typically a high-value IT Service providing end-products
which are either customized or packaged. Detailed steps
like product design, product development, product testing,
product installation & technical manual development, product
maintenance support and product exit policy are performed
as a part of this high-value IT Service.
vResearch and development (R&D) refers to processes which
involve the systematic investigation or experimentation
involving innovation or technical risk - the outcome of which
is either new knowledge (with or without a specific practical
application) or new or improved materials, products, devices,
processes, or services.
vSoftware Testing is a part of the software development process
aimed at evaluating a software item (system, subsystem, unit,
etc.) features (functionality, performance, etc.) against the
given set of system requirements. Software testing implies
running the software item in predetermined conditions (test
case, test scenario), recording and analyzing the obtained
results, and identifying errors (i.e. bugs), which means failure
to satisfy a set of requirements to the software.
Page 65
Abbreviations
ADM
Applications Development and Management
GDP
Gross Domestic Product
BPO
Business Process Outsourcing
HR
Human Resources
CRM
Customer Relationship Management
ICT
Information Communications Technology
ESO
Engineering Services Outsourcing
IP
Intellectual Property
F&A
Finance and Accounting
IT
Information Technology
FAO
Finance and Accounting Outsourcing
ITO
Information Technology Outsourcing
FDI
Foreign Direct Investment
KPO
Knowledge Process Outsourcing
FTE
Full-time Employee
MNC
Multinational Corporation
FTZ
Free Trade Zone
R&D
Research and Development
HEI
Higher Education Institutes
Page 66
Page 67
Costa Rica
Mexico
China
Bulgaria
Czech Republic
Estonia
Hungary
Poland
Central America
Central America
East Asia
Eastern Europe
Eastern Europe
Eastern Europe
Eastern Europe
Eastern Europe
Krakow, Warsaw
Budapest
Tallinn
Brno, Prague
Sofia
Beijing, Chengdu, Guangzhou, Shanghai,
Shenzhen, Tianjin
Mexico, Monterrey, Guadalajara
San José
38.48 million
9.91 million
1.31 million
10.21 million
7.26 million
1.34 billion
109.96 million
4.25 million
US$850 - 950
US$500 - 600
US$1,350 - 1,450
US$1,300 - 1,400
US$900 - 1,000
US$1,000 - 1,100 US$1,300 - 1,400
US$650 - 750
US$950 - 1,050 US$1,400 - 1,500
US$650 - 750
US$350 - 450
US$750 - 850
US$600 - 700
533,000 - 545,000 US$1,200 - 1,300 US$1,600 - 1,700
67,000 - 80,000
10,000 - 15,000
78,000 - 85,000
40,000 - 50,000
5,870,000 - 6,000,000
420,000 - 425,000
11,000 - 15,000*
US$5-7
US$3-5
US$2-3
US$3-5
US$2-3
US$4-6
US$2-3
US$2-4
Country Annual
Average Entry Average Entry Real Estate Region
Country
Cities in Study
Population Graduate Output Level Salary Level Salary Rental Cost (2008)
(2008)
in US$ per
in US$ per 2008 (US$
Month (BPO)
Month (ITO)
per sq.ft)
Appendix 1: Consolidated Country Data
Primary Languages
Spoken
Czech
Bulgarian
Mandarin
Spanish
Accenture, Capgemini, Citi, Deloitte, Fujitsu, GE, IBM,
Intel, HP, KPMG, Microsoft,
Oracle, SAP, Samsung,
TCS,Teleperformance
Accenture,Capgemini, Convergys, Deloitte, SAP,
GE, HP, IBM, Intel, EDS,
Microsoft, Oracle, TCS, Sun
Microsystems, Sykes,
Teleperformance
English
English
Russian,
English
Slovak
Turkish, Roma,
English
English,
Shanghainese
English
English
Other
Languages
Spoken
*Costa Rica’s number of graduates from GED 2007
Polish
Hungarian
Fujitsu, Oracle, SAP, KPMG, Estonian
Sun Microsystems
Accenture, Capgemini, Deloitte, EDS, Deloitte,
Fujitsu, IBM, Intel, Infosys,
Microsoft, KPMG, HP,
Oracle, Siemens, SAP,
Teleperformance, IBM
IBM, Fujitsu, SAP, HP, KPMG, Deloitte, Sun
Microsystems
Accenture, Capgemini, Convergys, Dell, Deloitte, Fujitsu, KPMG, IBM, Intel,
Microsoft, SAP, Sykes, Sun
Microsystems, TCS,
Teletech, Wipro,
Teleperformance
IBM, Accenture, HP-EDS, Fujitsu, Intel, Oracle, SAP,
KPMG, Deloitte, Capgemini,
TCS, ACS, HP, Sun
Microsystems, Teletech,
Teleperformance, Infosys
Convergys, Deloitte, Fujitsu, Spanish
HP, IBM, Intel, P&G, KPMG,
Sykes, Teletech
Sample List of Major
Service Providers
in the Country
Page 68
Ukraine
Egypt
Eastern Europe
Alexandria, Cairo
Kiev
Ljubljana
49.05 million
Johannesburg
South Africa
Casablanca (Dar-el-Beida) 34.34 million
6.20 million
23.38 million
83.08 million
45.99 million
2.00 million
5.46 million
140.7 million
22.25 million
Middle East and Morocco
Africa
Jordan
Amman
Slovenia
Eastern Europe
Bratislava
Slovakia
Eastern Europe
Moscow, Nizhniy Novgorod, St. Petersburg
Accra
Russia
Eastern Europe
Bucharest
Middle East and Ghana
Africa
Romania
Eastern Europe
US$350 - 450
US$350 - 450
US$350 - 450
US$550 - 650
US$600 - 700
US$550 - 650
US$650 - 750
US$750 - 850
US$650 - 750
US$500 - 600
US$500 - 600
US$500 - 600
US$700 - 800
US$950 - 1,100
US$900 - 1,000
US$1,000 - 1,100
US$1,400 - 1,500
US$1,100 - 1,200
125,000 - 135,000 US$1,100 - 1,200 US$1,500 - 1,600
85,000 - 95,000
45,000 - 55,000
9,000 - 12,000
95,000 - 110,000
555,000 - 565,000
15,000 - 20,000
40,000 - 50,000
1,990,000 - 2,000,000
200,00 - 210,000
US$2-3
US$1.5-2.5
US$2-4
US$.5-1.5
US$3-5
US$7-8
US$1-2
US$2-4
US$11-12
US$3-4
Country Number Average Entry Average Entry Real Estate Region
Country
Cities in Study
(2008)
in US$ per
Month (BPO)
Month (ITO)
per sq.ft)
Primary Languages
Spoken
Russian
Ukrainian
Deloitte, EDS, eTelecare, IBM, Intel, KPMG, TCS, Microsoft, Oracle, SAP, Siemens, Teletech, Sykes,
Sun Microsystems,
Teleperformance
IBM, Fujitsu, Oracle, SAP, HP, Deloitte, Capgemini
IBM, Oracle, Deloitte
ACS, Novel Solutions, eServices
Afrikaans
Moroccan Arabic
Arabic
Asante
Convergys, Deloitte, Fujitsu, Arabic
IBM, KPMG, Oracle, Wipro, Microsoft, Sun Microsystems,
Teleperformance
IBM, Fujitsu, Intel, Oracle, SAP, HP, KPMG, SAP, Deloitte, Sun Microsystems,
Teleperformance
Oracle, KPMG, Deloitte, Sun Slovenian
Microsystems
IBM, Accenture, CSC, HP,
Slovak
Fujitsu, Oracle, SAP, KPMG, Deloitte, Capgemini, Sun Microsystems, Sykes, IBM,
Teleperformance
IBM, Accenture, HP-EDS, HP, Fujitsu, Intel, SAP,
Oracle, KPMG, Deloitte, Sun
Microsystems, Capgemini,
Convergys, Teleperformance
Capgemini, Deloitte, IBM, Romanian
Fujitsu, HP, KPMG, Oracle, SAP, Sun Microsystems,
Teleperformance
Service Providers
in the Country
English,
Ndebele, Pedi,
Sotho
Arabic, French,
English
English
Ewe, English,
Fante, French
English, French
Russian,
English
Serbo-Croatian,
Italian, English
Hungarian,
Roma,
English
English
Hungarian,
Roman (Gypsy),
English
Other
Languages
Spoken
Page 69
Canada
U.S.A. (Puerto Rico)
Argentina
Brazil
Chile
Uruguay
India
Sri Lanka
North America
North America
South America
South America
South America
South America
South Asia
South Asia
40.91 million
3.96 million
Colombo
Bangalore, Bhubaneswar, Chandigarh, Pune,
Chennai, Coimbatore, Delhi, Jaipur, Kolkata,
Mumbai, Hyderabad,
Thiruvananthapuram
Montevideo
Santiago
21.32 million
1.17 billion
3.48 million
16.60 million
10,000 - 15,000
3,200,000 - 3,500,000
8,000 - 10,000
87,000 - 95,000
820,000 - 840,000
220,000 - 235,000
10,000 - 15,000
US$300 - 400
US$350 - 450
US$500 - 600
US$600 - 700
US$650 - 750
US$550 - 650
US$500 - 600
US$600 - 700
US$1,000 - 1,100
US$1,450 - 1,550
US$1,500 - 1,600
US$1,100 - 1,200
US$2,500 - 2,800 US$3,500 - 4,000
33.49 million 160,000 - 180,000** US$2,500 - 3,000 US$4,000 - 4,500
Brasilia, Curitiba, Recife, 198.74 million
Rio de Janeiro, São Paulo
Buenos Aires, Cordoba
Puerto Rico
Halifax, Toronto
US$3-5
US$2-4
US$1.5-3
US$3-5
US$4-6
US$4-6
US$1.5-3
US$2-4
Country Annual
Country
Cities in Study
(2008)
in US$ per
Month (BPO)
Month (ITO)
per sq.ft)
Primary Languages
Spoken
Tamil
Hindi, English
Uruguayan Spanish
Spanish
Portuguese
Spanish
Spanish
English
Tamil, Telugu,
Kannada, Urdu,
Malayalam,
Bengali
Portunol,
English
English
Italian, English
Italian, English,
German, French
English
French
Other
Languages
Spoken
**Canada’s number of graduates from Statistics Canada
Convergys, HSBC, IBM, Intel, Microsoft, Oracle,
Sun Microsystems
Accenture, Capgemini, Citi, Convergys, Infosys, Deloitte,
Dell, Fujitsu, HP, HSBC, IBM, Intel, SAP, JP Morgan & Chase, KPMG, Microsoft,
Siemens, Motorola, Oracle,
Samsung, Sony, Sykes,
Sun Microsystems, TCS,
Teleperformance, Wipro
Intel, Oracle, SAP, HP, Deloitte, Siemens, TCS
Accenture, Deloitte, IBM, Intel, KPMG, SAP, TCS, Sun
Microsystems, Oracle,
Teleperformance
Accenture, Convergys, Dell, Deloitte, Fujitsu, TCS, Intel,
KPMG, SAP, Sykes, Sun
Teleperformance, Wipro
Accenture, Capgemini, Convergys, Deloitte, SAP, EDS, IBM, Intel, KPMG,
Oracle, Siemens, TCS, Sun
Microsystems, Sykes,
Oracle, HP, Motorola
Accenture, Capgemini, EDS, English
Convergys, Deloitte, TCS,
Fujitsu, IBM, Infosys, KPMG,
Oracle, SAP, Sykes, Sun
Teleperformance,
Service Providers
in the Country
Page 70
Philippines
Singapore
Vietnam
Ireland
U.K.
Southeast Asia
Southeast Asia
Southeast Asia
Western Europe
Western Europe
25.27 million
Belfast, Glasgow, Leeds
(Yorkshire & Humber)
Cork, Dublin
Hanoi, Ho Chi Minh
Singapore
60.94 million
4.20 million
86.97 million
4.61 million
Bacolod City, Manila NCR, 97.98 million
Mandaluyong, Cebu City,
Iloilo City, Pasig City, Quezon City, Santa Rosa
Laguna
Kuala Lumpur
*Source: CIA Factbook 2008
**Source: UNESCO Global Education Digest 2009; Tholons Research 2009
***Source: Tholons Research
****Source: Based on Cushman & Wakefield Research Report; Tholons Research 2009
Malaysia
Southeast Asia
US$600 - 700
US$1,000 - 1,100
US$350 - 400
US$2,500 - 3,000 US$3,300 - 3,500
US$300 - 400
US$1,600 - 1,700 US$2,200 - 2,500
US$400 - 500
US$600 - 700
650,000 - 655,000 US$2,000 - 2,500 US$2,800 - 3,000
60,000 - 70,000
240,000 - 250,000
10,000 - 15,000
410,000 - 420,000
160,000 - 165,000
US$2-4
US$6-7
US$6-7
US$7-9
US$3-4
US$4-5
Country Annual
Country
Cities in Study
Population Graduate Output Level Salary Level Salary Rental Cost (2008)*
(2008)**
in US$ per
Month (BPO)*** Month (ITO)*** per sq.ft)****
IBM, Accenture, HP-EDS, CSC, Fujitsu, Intel, Oracle,
SAP, HP, KPMG, Deloitte,
Capgemini, Teletech, Sun
Microsystems, Convergys,
Teleperformance, TCS,
Infosys, ACS, Telus
Accenture, Dell, Fujitsu, IBM, Infosys, Intel, Microsoft,
Oracle, Sun Microsystems,
Deloitte, IBM, Siemens, HP, Oracle, Fujitsu, SAP, Intel,
KPMG, Microsoft, Sun
Microsystems,
Teleperformance IBM, Accenture, HP-EDS, CSC, Fujitsu, Deloitte, Intel,
Oracle, SAP, HP, KPMG,
Capgemini, TCS, Sun
Microsystems, Convergys,
Telus, Teleperformance
Accenture, Citi, Convergys, Dell, eTelecare, GE, Fujitsu,
HP, HSBC, IBM, Intel, JP
Morgan & Chase, P&G,
SAP, Siemens, Sykes, TCS,
Teletech, Sun Microsystems,
Wipro, Teleperformance
IBM, Accenture, HP-EDS, CSC, Fujitsu, Intel, HP, SAP,
Oracle, KPMG, Deloitte, Sun
Convergys, TCS, ACS
Service Providers
in the Country
English
Irish
Vietnamese
English
Tagalog
Bahasa Malaysia
Primary Languages
Spoken
Welsh, Scottish
English
English
Mandarin
English,
Cebuano
English,
Chinese
Other
Languages
Spoken
Page 71
Costa Rica
Mexico
Mexico
Mexico
China
Central America
Central America
Central America
East Asia
Country
Central America
Region
Beijing
Guadalajara
Monterrey
Mexico
San José
City
16,962,426
1,574,321
1,146,578
8,507,639
360,139
City Population
(2008)
US$350 - 450
US$650 - 751
US$650 - 750
US$750 - 850
US$600 - 700
City Average
Monthly Entry
Level Salary in
US$ per Month
(BPO)
US$2-3
US$2-3
US$2-3
US$1,350 1,450
US$1,350 1,450
US$1,350 1,450
US$4-6
US$2-4
US$1,300 1,400
US$500 - 600
City Real Estate
Rental Cost
2008 (US$ per
sq.ft)
City Average
Entry Level
Salary in US$
per Month
(ITO)
Appendix 2: Consolidated City Data
English
English
Capgemini, Deloitte,
IBM, SAP, KPMG,
Teletech, Accenture,
Spanish
HP-EDS, Intel, Sun
Microsystems, Oracle,
TCS
Spanish
Spanish
Mandarin
Deloitte, IBM, Infosys,
Accenture, ACS,
KPMG, Teleperformance
Deloitte, TCS, IBM,
Intel, Teletech, HP,
KPMG
Sun Microsystems,
IBM, HP, Miscrosoft,
Intel, Accenture,
Deloitte, Fujitsu,
Teleperformance
English,
Shanghainese
English
English
Spanish
Convergys, Deloitte,
Intel, HP, Sykes,
Teletech, P&G,
KPMG, Fujitsu, IBM
Other
Languages
Spoken
Primary
Languages
Spoken
Service Providers in
the City
Page 72
China
China
China
China
China
China
East Asia
East Asia
East Asia
East Asia
East Asia
Country
East Asia
Region
Tianjin
Shenzhen
Dalian
Shanghai
Guangzhou
Chengdu
City
10,317,022
12,313,756
4,023,678
20,523,120
15,489,394
8,503,465
City Population
(2008)
US$250 - 350
US$300 - 400
US$250 - 350
US$350 - 450
US$300 - 400
US$250 - 350
City Average
Monthly Entry
Level Salary in
US$ per Month
(BPO)
US$400 - 500
US$450 - 550
US$400 - 500
US$500 - 600
US$450 - 550
US$400 - 500
City Average
Entry Level
Salary in US$
per Month
(ITO)
US$3-5
US$3-5
US$3-5
US$5-6
US$4-5
US$3-5
City Real Estate
Rental Cost
2008 (US$ per
sq.ft)
Mandarin
IBM, Intel, Deloitte,
Fujitsu
Mandarin
English,
Shanghainese
Mandarin
Intel, Accenture, Dell,
SAP, IBM, GenPact,
Avaya
Deloitte
English,
Shanghainese
IBM, Dell, Microsoft,
Capgemini, Accenture,
Mandarin
Deloitte, Fujitsu, Infosys,
Sykes
English,
Shanghainese
English,
Shanghainese
English,
Shanghainese
Mandarin
Accenture, Capgemini, Sun
Microsystems,Deloitte,
Sykes
English,
Shanghainese
Other
Languages
Spoken
Mandarin
Primary
Languages
Spoken
Intel, IBM, Sun
Microsystems,Microsoft,
Fujitsu
the City
Page 73
Country
Czech Republic
Czech Republic
Estonia
Hungary
Poland
Poland
Romania
Region
Eastern Europe
Eastern Europe
Eastern Europe
Eastern Europe
Eastern Europe
Eastern Europe
Eastern Europe
Bucharest
Warsaw
Krakow
Budapest
Tallinn
Prague
Brno
City
1,941,781
1,707,981
756,441
1,720,289
398,792
1,225,009
371,285
City Population
(2008)
US$3-4
US$2-3
US$4-6
US$3-4
US$1,400 1,500
US$900 1,000
US$1,300 1,400
US$1,450 1,550
US$1,600 1,700
US$1,100 1,200
US$650 - 750
US$1,000 1,100
US$1,100 1,200
US$1,200 1,300
US$650 - 750
US$950 - 1,050
US$2-4
US$3-5
US$2-3
US$1,300 1,400
US$900 - 1,000
City Real Estate
Rental Cost
2008 (US$ per
sq.ft)
City Average
Entry Level
Salary in US$
per Month
(ITO)
City Average
Monthly Entry
Level Salary in
US$ per Month
(BPO)
Polish
Polish
Romanian
IBM, Accenture, HP,
Oracle, GE, Samsung,
Deloitte, Fujitsu, Capgemini, Sun Microsystems, Citi, Teleperformance, KPMG
IBM, Microsoft, HP,
Wipro, Teleperformance, Accenture,
KPMG
Hungarian
IBM, Accenture, TCS,
Oracle, EDS, Teleperformance, KPMG,
Sykes
IBM, Deloitte, Fujitsu,
Capgemini, GE, KPMG
Estonian
Czech
Accenture, Sun Microsystems, Microsoft,
IBM, SAP, EDS,
Deloitte, Fujitsu, Capgemini, HP, Infosys
Fujitsu, Oracle, Microsoft, IBM
Czech
Primary
Languages
Spoken
Accenture, IBM,
Deloitte
the City
Hungarian, Roman
(Gypsy),
Englishj
English
English
English
Russian,
English
Slovak
Slovak
Other
Languages
Spoken
Page 74
Russia
Russia
Slovakia
Slovenia
Ukraine
Egypt
Egypt
Ghana
Eastern Europe
Eastern Europe
Eastern Europe
Eastern Europe
Middle East and
Africa
Middle East and
Africa
Middle East and
Africa
Country
Eastern Europe
Region
Accra
Cairo
Alexandra
Kiev
Ljubljana
Bratislava
St. Petersburg
Moscow
City
2,170,397
6,750,131
4,252,686
2,745,768
268,423
428,791
4,568,047
10,470,318
City Population
(2008)
US$350 - 450
US$550 - 650
US$450 - 550
US$600 - 700
US$550 - 650
US$650 - 750
US$700 - 800
US$750 - 850
City Average
Monthly Entry
Level Salary in
US$ per Month
(BPO)
US$5-7
US$2-4
US$1-2
US$7-8
US$1,400 1,500
US$1,000 1,100
US$900 1,000
US$950 1,100
US$500 - 600
US$700 - 800
US$1-2
US$3-5
US$3-5
US$11-12
US$1,400 1,500
US$600 - 700
City Real Estate
Rental Cost
2008 (US$ per
sq.ft)
City Average
Entry Level
Salary in US$
per Month
(ITO)
Asante
Arabic
Deloitte, Fujitsu, Sun
Microsystems, EDS,
Teleperformance,
KPMG
ACS, KPMG
Arabic
Ukrainian
KPMG
Microsoft, KPMG,
Teleperformance
Slovenian
Slovak
Accenture, Dell, Sun
Microsystems, IBM,
HP, Deloitte, Fujitsu,
KPMG
HP, IBM, Microsoft,
Oracle, SAP, KPMG
Russian
Russian
Primary
Languages
Spoken
Deloitte, Intel Accenutre, Sun Microsystems
Deloitte, Fujitsu, IBM,
Intel, Sun Microsystems, Microsoft,
Samsung, Accenture,
Teleperformance
the City
Ewe, English,
French, Fante
English, French
English, French
Russian,
English
Serbo-Croatian,
Italian, English
Hungarian,
Roma, English
English
English
Other
Languages
Spoken
Page 75
Morocco
South Africa
Canada
Canada
Argentina
Brazil
Brazil
Middle East and
Africa
North America
North America
South America
South America
South America
Country
Middle East and
Africa
Region
Curitiba
Brasilia
Buenos Aires
Toronto
Halifax
Johannesburg
Casablanca
(Dar-el-Beida)
City
1,829,610
2,409,814
2,650,887
5,613,342
387,828
4,011,211
3,045,271
City Population
(2008)
US$3-5
US$1,100 1,200
US$600 - 650
US$650 - 750
US$550 - 650
US$1-3
US$4,000 4,500
US$2,500 3,000
US$1300 - 1400 US$3-4
US$1300 - 1400 US$4-5
US$1-2
US$4,000 4,500
US$2,000 3,000
US$2-3
US$1-3
City Real Estate
Rental Cost
2008 (US$ per
sq.ft)
US$1,500 1,600
US$500 - 600
City Average
Entry Level
Salary in US$
per Month
(ITO)
US$1,100 1,200
US$350 - 450
City Average
Monthly Entry
Level Salary in
US$ per Month
(BPO)
English
English
Spanish
Portuguese
Portuguese
Fujitsu, Convergys,
ICT, KPMG, EDS
Accenture, Convergys,
Infosys, TCS, Wipro,
EDS, Capgemini,
KPMG, Sykes
Capgemini, Accenture, IBM, Siemens,
EDS, TCS, SAP, Sun
Microsystems, Teleperformance, KPMG,
Teletech
Accenture, Deloitte,
TCS, KPMG
Wipro, KPMG
Italian, English,
German,
French
French
French
English,
Ndebele, Pedi,
Sotho
EDS, KPMG, Sun Microsystems, Accenture, Afrikaans
Sykes
Other
Languages
Spoken
Arabic, French,
English
Primary
Languages
Spoken
Moroccan
Arabic
Deloitte, Fujitsu, Capgemini, KPMG
the City
Page 76
Brazil
Brazil
Chile
Uruguay
India
India
India
India
South America
South America
South America
South Asia
South Asia
South Asia
South Asia
Country
South America
Region
Coimbatore
Chennai
Chandigarh
Bangalore
Montevideo
Santiago
São Paulo
Rio de Janeiro
City
1,781,536
7,496,403
1,025,331
7,144,792
1,253,064
4,887,760
10,300,746
6,127,889
City Population
(2008)
US$300 - 380
US$350 - 400
US$320 - 380
US$350 - 420
US$500 - 600
US$600 - 700
US$650 - 700
US$650 - 700
City Average
Monthly Entry
Level Salary in
US$ per Month
(BPO)
US$2-3
US$1,000 1,100
US$580 - 630
US$600-650
US$580 - 630
US$1-3
US$2-4
US$3-4
US$2-4
US$3-5
US$1,450 1,550
US$600 - 680
US$4-6
US$4-6
City Real Estate
Rental Cost
2008 (US$ per
sq.ft)
US$1500 - 1600
US$1300 - 1500
City Average
Entry Level Salary in US$ per
Month (ITO)
Kannad
Hindi
Tamil
Hindi
Infosys, Intel, Wipro,
IBM, Dell, Microsoft
Accenture, Capgemini,
Deloitte, TCS, Wipro,
Infosys, IBM, Microsoft
Deloitte, TCS, IBM,
Satyam
Spanish
Sun Microsystems,
TCS, Teleperformance,
KPMG
Accenture, Capgemini, Convergys, Dell,
Infosys, KPMG, Intel,
Sun Microsystems,
Microsoft, Oracle
Portuguese
Convergys, Deoitte,
TCS, KPMG, Teleperformance, Teletecj
Uruguayan
Spanish
Portuguese
KPMG
KPMG, TCS
the City
English, Bengali,
Telegu, Urdu
English, Bengali,
Telegu, Urdu
English, Bengali,
Telegu, Urdu
English, Tamil,
Telegu, Urdu
Portunol, English
English
Italian, English
Other Languages
Spoken
Page 77
India
India
India
India
India
India
Sri Lanka
Malaysia
Philippines
South Asia
South Asia
South Asia
South Asia
South Asia
South Asia
Southeast Asia
Southeast Asia
Country
South Asia
Region
Manila NCR
Kuala Lumpur
Colombo
Pune
Mumbai
Kolkata
Jaipur
Hyderabad
Delhi
City
11,805,635
1,467,190
677,115
5,013,237
19,797,584
14,998,862
3,127,600
6,980,051
17,339,100
City Population
(2008)
US$400 - 500
US$600 - 700
US$300 - 400
US$320 - 400
US$350 - 450
US$350 - 400
US$320 - 380
US$350 - 420
US$350 - 400
City Average
Monthly Entry
Level Salary in
US$ per Month
(BPO)
US$3-5
US$3-5
US$1,000 1,100
US$600 - 700
US$1-3
US$3-4
US$12-14
US$3-4
US$1-3
US$2-4
US$9-11
City Real Estate
Rental Cost
2008 (US$ per
sq.ft)
US$500 - 600
US$600 - 630
US$600 - 700
US$600 - 630
US$580 - 630
US$600 - 650
US$600 - 680
City Average
Month (ITO)
Hindi
Rajasthani
Bengali, Hindi
Hindi
Marathi
Tamil
Bahasa Malaysia English, Chinese
Tagalog
Dell, Deloitte, TCS,
Wipro, Infosys, KPMG
Infosys, Teleperformance, Satyam
Computers
TCS, Wipro, KPMG
Infosys, KPMG
TCS, Wipro, Infosys
Convergys, HSBC,
IBM, Intel, Microsoft,
Oracle, Sun Microsystems, KPMG
Dell, TCS, Wipro,
Teletech
Deloitte, TCS, Infosys,
KPMG, Teletech,
Teleperformance
English
English
English, Hindi
English, Bengali,
Telegu, Urdu
English
English, Hindi,
Marwari
English, Bengali,
Telegu, Urdu
English, Punjabi,
Urdu
Hindi
Infosys, KPMG, Teleperformance
Other Languages
Spoken
the City
Page 78
Singapore
Vietnam
Vietnam
Ireland
U.K.
U.K.
Southeast Asia
Southeast Asia
Southeast Asia
Western Europe
Western Europe
Western Europe
Glasgow
Belfast
Dublin
Ho Chi Minh
Hanoi
Singapore
Cebu City
City
637,000
268,400
511,508
5,882,808
2,060,815
4,651,013
810,940
US$350 - 400
US$3,300 3,500
US$2,600 2,900
US$2,800 3,000
US$300 - 400
US$2,500 3,000
US$2,300 2,800
US$2,000 2,500
US$330 - 380
US$2,200 2,500
US$1,600 1,700
US$300 - 400
US$580 - 650
City Average
Month (ITO)
US$400 - 450
*Source: City Population & Tholons Estimate 2009 **Source: Based on Cushman & Wakefield Research Report and CBRE Report, Tholons Estimate 2009
Philippines
Country
Southeast Asia
Region
City Population
(2008)*
City Average
Monthly Entry
Level Salary in
US$ per Month
(BPO)
US$4-6
US$2-4
US$6-8
US$6-7
US$4-6
US$7-9
US$2-3
City Real Estate
Rental Cost
2008 (US$ per
sq.ft)**
English
Vietnamese
Vietnamese
English
IBM, Accenture, HPEDS, CSC, Fujitsu,
Intel, Oracle, SAP,
HP, KPMG, Deloitte,
Capgemini, Sun Microsystems, Convergys,
Teleperformance, TCS,
Telus
Deloitte, Teleperformance, HP, Oracle,
Intel
Deloitte, Fujitsu, HP,
Oracle, IBM
Accenture, Dell,
Deloitte, TCS, Infosys,
KPMG, IBM
KPMG
English
English
Cebuano
Deloitte, Convergys,
Wipro
KPMG, IBM, HP-EDS
the City
Welsh, Scottish
English
English
Mandarin
Tagalog, English
Other Languages
Spoken
Appendix 3: Consolidated City Scores
City
Rank
2007
Rank
2008
Rank
2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of Life
Risk Profile
Bangalore
Top 5
Top 8
Top 8
9
9
7
7
8
5
Delhi (NCR)
Top 5
Top 8
Top 8
9
9
7
8
9
5
Mumbai
Top 5
Top 8
Top 8
9
9
7
7
9
4
Manila NCR
Top 5
Top 8
Top 8
8
9
7
8
8
6
Dublin
Top 5
Top 8
Top 8
7
9
3
8
9
9
Chennai
1
Top 8
Top 8
9
9
8
7
6
5
Hyderabad
2
Top 8
Top 8
8
8
8
7
6
6
Pune
3
Top 8
Top 8
8
8
7
7
8
6
Cebu City
4
1
1
6
8
8
7
8
7
Shanghai
8
2
2
7
7
7
8
8
7
Beijing
10
3
3
7
7
7
8
8
7
Kraków
16
5
4
5
7
6
8
6
7
Ho Chi Minh City
6
4
5
6
7
7
7
7
8
Buenos Aires
14
9
6
6
7
5
7
9
5
Cairo
11
7
7
7
5
7
8
8
6
São Paulo
15
8
8
7
5
5
9
9
6
Shenzhen
13
10
9
6
6
8
7
7
7
Hanoi
12
11
10
5
6
7
6
5
7
Curitiba
17
13
11
5
6
7
6
6
8
Dalian (Dairen)
18
16
12
6
5
8
8
5
6
Chandigarh
9
12
13
6
4
8
6
6
6
Prague
20
14
14
6
7
5
8
8
7
Kolkata
5
6
15
7
5
9
7
4
1
Santiago
19
18
16
6
7
6
7
8
7
Colombo
7
19
17
5
4
9
6
6
4
Coimbatore
21
17
18
5
4
9
5
4
6
Johannesburg
25
20
19
8
4
5
9
8
7
Page 79
Appendix 3: Consolidated City Scores
City
San José
Rio de Janeiro
Budapest
Toronto
Rank
2007
Rank
2008
Rank
2009
Scale and
Quality of
Workforce
Business
Catalyst
Cost
Infrastructure
Quality of Life
Risk Profile
29
27
20
4
7
6
7
8
7
-
26
21
7
4
6
8
9
7
28
25
22
6
7
5
9
6
7
-
22
23
8
8
2
9
9
8
Guangzhou (Canton)
22
23
24
6
4
8
6
5
6
Belfast
24
24
25
4
5
4
9
8
8
Mexico City
-
30
26
7
7
6
7
7
6
Kuala Lumpur
31
33
27
6
7
5
8
8
5
Warsaw
26
28
28
5
6
6
7
8
5
Jaipur
-
31
29
5
3
9
6
4
4
Brno
27
29
30
3
8
5
8
6
8
St. Petersburg
32
32
31
8
5
3
8
9
5
Accra
33
34
32
5
3
8
7
4
6
Chengdu
-
37
33
6
7
8
6
5
5
Bucharest
41
38
34
6
7
5
9
8
8
Bratislava
38
35
35
4
4
5
8
6
7
Singapore
-
36
36
5
8
3
9
9
9
Monterrey
44
41
37
6
5
6
7
6
6
Moscow
40
39
38
9
5
2
9
9
5
Guadalajara
-
44
39
5
5
7
6
7
7
Sofia
39
40
40
5
6
5
8
6
8
Brasília
42
43
41
5
4
6
8
6
7
Glasgow City
30
42
42
4
3
3
9
9
8
Tianjin
-
-
43
5
5
7
6
5
8
Casablanca
-
-
44
5
5
7
6
4
8
Halifax
34
48
45
6
5
3
9
8
8
Tallinn
45
46
46
4
5
6
7
6
8
-
-
47
2
3
5
6
5
8
Montevideo
Alexandria
-
-
48
7
3
7
7
5
3
Ljubljana
47
50
49
2
5
7
7
6
6
Kiev
46
49
50
6
3
4
7
8
6
Source: Tholons Research 2009
Page 80
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Reproduction of this document and all content within is prohibited unless authorized by Tholons. All rights reserved.
For analyst inquiries, questions and requests regarding this report you may also contact:
Saugata Sengupta
Analyst
saugata@tholons.com
#10, 2nd Floor
80 ft Road, RMV 2nd Stage
Bangalore 560 094, India
Phone: +91-80-2351-9760
For more details about Tholons’ Services Globalization and Investment Advisory capabilities, please visit our website at: www.tholons.com
About Tholons
Tholons is a Services Globalization and Investment Advisory firm that helps
companies maximize their return from globalization. Our advisors engage with
governments and trade bodies to build compelling strategies for enhancing the
value proposition of offshore destinations.
We combine “Best of Breed” consulting experience with deep execution
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the considerable experience of a hand-picked team, which has successfully
formulated and executed globalization strategies to unlock value for Global
Fortune 1000 companies. Service providers leverage Tholons expertise to
optimize their global delivery model.
Editor
Avinash Vashistha
Project Manager
Manuel Ravago
Authors
Saugata Sengupta
Clark Lester Bautista
Jhoana Mutiangpili
Karen San Pedro
For more details about Tholons’ Services
Globalization and Investment Advisory
capabilities, please visit our website at: www.tholons.com
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